[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
U.S.-EUROPEAN COOPERATION ON CHINA AND THE BROADER INDO-PACIFIC
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON ASIA, THE PACIFIC, CENTRAL ASIA, AND NONPROLIFERATION
and
SUBCOMMITTEE ON EUROPE, ENERGY, THE ENVIRONMENT AND CYBER
OF THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
July 20, 2021
__________
Serial No. 117-60
__________
Printed for the use of the Committee on Foreign Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available: http://www.foreignaffairs.house.gov/, http://
docs.house.gov,
or http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
45-169 PDF WASHINGTON : 2021
COMMITTEE ON FOREIGN AFFAIRS
GREGORY W. MEEKS, New York, Chairman
BRAD SHERMAN, California MICHAEL T. McCAUL, Texas, Ranking
ALBIO SIRES, New Jersey Member
GERALD E. CONNOLLY, Virginia CHRISTOPHER H. SMITH, New Jersey
THEODORE E. DEUTCH, Florida STEVE CHABOT, Ohio
KAREN BASS, California SCOTT PERRY, Pennsylvania
WILLIAM KEATING, Massachusetts DARRELL ISSA, California
DAVID CICILLINE, Rhode Island ADAM KINZINGER, Illinois
AMI BERA, California LEE ZELDIN, New York
JOAQUIN CASTRO, Texas ANN WAGNER, Missouri
DINA TITUS, Nevada BRIAN MAST, Florida
TED LIEU, California BRIAN FITZPATRICK, Pennsylvania
SUSAN WILD, Pennsylvania KEN BUCK, Colorado
DEAN PHILLIPS, Minnesota TIM BURCHETT, Tennessee
ILHAN OMAR, Minnesota MARK GREEN, Tennessee
COLIN ALLRED, Texas ANDY BARR, Kentucky
ANDY LEVIN, Michigan GREG STEUBE, Florida
ABIGAIL SPANBERGER, Virginia DAN MEUSER, Pennsylvania
CHRISSY HOULAHAN, Pennsylvania AUGUST PFLUGER, Texas
TOM MALINOWSKI, New Jersey PETER MEIJER, Michigan
ANDY KIM, New Jersey NICOLE MALLIOTAKIS, New York
SARA JACOBS, California RONNY JACKSON, Texas
KATHY MANNING, North Carolina YOUNG KIM, California
JIM COSTA, California MARIA ELVIRA SALAZAR, Florida
JUAN VARGAS, California JOE WILSON, South Carolina
VICENTE GONZALEZ, Texas RON WRIGHT, Texas
BRAD SCHNEIDER, Illinois
Sophia Lafargue, Staff Director
Brendan Shields, Republican Staff Director
------
Subcommittee on Asia, the Pacific, Central Asia, and Nonproliferation
AMI BERA, California, Chairman,
BRAD SHERMAN, California STEVE CHABOT, Ohio, Ranking Member
DINA TITUS, Nevada SCOTT PERRY, Pennsylvania
ANDY LEVIN. Michigan ANN WAGNER, Missouri
CHRISSY HOULAHAN, Pennsylvania KEN BUCK, Colorado
ANDY KIM, New Jersey TIM BURCHETT, Tennessee
GERALD CONNOLLY, Virginia MARK GREEN, Tennessee
TED LIEU, California ANDY BARR, Kentucky
ABIGAIL SPANBERGER, Virginia YOUNG KIM, California
KATHY MANNING, North Carolina
Jamie Morgan, Staff Director
------
Subcommittee on Europe, Energy,the Environment and Cyber
WILLIAM R. KEATING, Massachusetts, Chairman
SUSAN WILD, Pennsylvania BRIAN FITZPATRICK, Pennsylvania,
ABIGAIL SPANBERGER, Virginia Ranking Member
ALBIO SIRES, New Jersey ANN WAGNER, Missouri
THEODORE DEUTCH, Florida ADAM KINZINGER, Illinois,
DAVID CICILLINE, Rhode Island BRIAN MAST, Florida
DINA TITUS, Nevada DAN MEUSER, Pennsylvania
DEAN PHILLIPS, Minnesota AUGUST PFLUGER, Texas
JIM COSTA, California NICOLE MALLIOTAKIS, New York
VICENTE GONZALEZ, Texas PETER MEIJER, Michigan
BRAD SCHNEIDER, Illinois
Leah Nodvin, Staff Director
C O N T E N T S
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Page
MATERIALS SUBMITTED FOR THE RECORD
Materials submitted for the record from Chair Bera............... 3
WITNESSES
Goodman, Mr. Matthew, Senior Vice President for Economics, Center
for Strategic and International Studies........................ 13
Ferchen, Dr. Matt, Head of Global China Research, Mercator
Institute for China Studies.................................... 24
Conley, Ms. Heather, Senior Vice President for Europe, Eurasia,
and the Arctic, Director, Europe, Russia, and Eurasia Program,
Center for Strategic and International Studies................. 34
Rough, Mr. Peter, Senior Fellow, Hudson Institute................ 43
ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD
Additional materials submitted for the record from Representative
Perry.......................................................... 60
APPENDIX
Hearing Notice................................................... 86
Hearing Minutes.................................................. 87
Hearing Attendance for Asia Subcommittee......................... 88
Hearing Attendance for Europe Subcommittee....................... 89
STATEMENT FOR THE RECORD
Statement for the record submitted from Representative Connolly.. 90
U.S.-EUROPEAN COOPERATION ON CHINA AND THE BROADER INDO-PACIFIC
Tuesday, July 20, 2021
House of Representatives,
Subcommittee on Asia, the Pacific,
Central Asia and Nonproliferation joint with the
Subcommittee on Europe, Energy, the
Environment, and Cyber
Committee on Foreign Affairs,
Washington, DC.
The subcommittees met, pursuant to notice, at 2:06 p.m.,
via Webex, Hon. Ami Bera [chairman of the subcommittee on Asia]
presiding.
Mr. Bera. The Subcommittee on Asia, the Pacific, Central
Asia, and Nonproliferation will come to order. Without
objection, the chair is authorized to declare a recess of the
committee at any point and all members will have 5 days to
submit statements, extraneous material, and questions for the
record subject to the length limitation in the rules.
To insert something into the record, please have your staff
email the previously mentioned address or contact full
committee staff. Please keep your video function on at all
times, even when you are not recognized by the chair. Members
are responsible for muting and unmuting themselves, and please
remember to mute yourself after you finish speaking.
Consistent with remote committee proceedings of H.Res. 8,
staff will only mute members and witnesses, as appropriate,
when they are not under recognition, to eliminate background
noise. I see we have a quorum and will now recognize myself for
opening remarks. And as mentioned earlier to the witnesses
unfortunately, we may have votes get called at some point
during this hearing, in which case we will take a recess and
then reconvene after votes.
I would like to thank my chair, Bill Keating, and the
Europe Subcommittee staff for partnering with us on this
important hearing, and welcome our witnesses and members of the
public for joining us this afternoon.
Last month, the APCAN Subcommittee held a hearing on the
role of liberal norms and values in U.S. foreign policy for the
Indo-Pacific. In that hearing, our witnesses reaffirmed the
importance of having a positive agenda and redoubling our
commitment to the democratic values such as respect for the
rule of law, for free markets, freedom of navigation, human
rights, human dignity that really have been a key source of
U.S. strength and competitiveness.
If we think about our history post-World War II and the
transatlantic relationship, as we came together and built a
strong relationship between the United States and our European
allies and partners, we not only created the most dynamic
regions in the world, the most innovative regions of the world,
but we advanced a common set of shared values.
Again, values that I just mentioned of democracy; values of
human dignity; values of free market and entrepreneurship and
competition. Values that not only served the United States and
Europe well, but also served the rest of the world as we
created a partnership and a relationship that really led one of
the most peaceful times in world history but also lifted
millions of people around the world out of poverty.
As we move forward into the 21st century we do see threats
to that liberal, competitive, democratic order. We see the rise
of authoritarianism in parts of the world, and much of this was
discussed at the recently concluded G7 meetings which also
included four additional advanced democracies around the world.
And as you look at that communique, it does recognize the
vibrancy of what is happening in the Indo-Pacific region, and
the purpose of this hearing is to talk about how the United
States and Europe can work together not just to continue what
really has been a thriving partnership, but also to look at the
other dynamic areas of the world, in this case, particularly
the Indo-Pacific, and how we can advance through our
partnership and like-minded values, a set and a construct that
will serve us well in the 21st century, again building on those
values of free markets, freedom of navigation, competition,
human dignity, human rights and democracy.
It is not a given which set of values will prevail in the
21st century, but it is incumbent upon us as friends and
longtime partners to continue to work together not just on the
transatlantic relationship, but now on the transpacific
relationship and how we bring those two partnerships together.
I also would like to take the opportunity to recognize the
work of Chairman Meeks who has been a leader in supporting the
transatlantic partnership on a number of issues including
climate change and infrastructure, and at this time, I would
ask unanimous consent to enter Chair Meeks' June 28th foreign
policy op-ed on the Build Back Better World partnership into
the record.
Hearing no objections, we will enter that into the record.
[The information referred to follows:]
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Mr. Bera. I am going to keep my comments short so we can
actually get to the witnesses and hopefully get to as many
members as possible. And with that I want to recognize my good
friend from Ohio, our ranking member, Representative Steve
Chabot, for any opening comments he may have.
Mr. Chabot. Thank you, Mr. Bera, and thank you for the
witnesses. Mr. Chairman, a defining story of the 20th century
was the transatlantic solidarity in the face of existential
threats to our most closely held values. That was back in the
20th century. The wars that our democracies fought together,
the order that we helped shape in their aftermath vanquished
the tyrants--principally, socialist tyrants, I would note--who
sought to create a world in which individual liberties were
subjugated to the interests and ideologies of the State. A
world in which the sovereignty of smaller, weaker, or just
plain unlucky States was trodden on by would-be hegemons.
Regrettably, the 21st century has presented us with a new
socialist challenge perhaps of comparable scale. Xi Jinping has
emerged as the most power-hungry leader of the PRC since Mao
Zedong, and under his regime the Chinese Communist Party isn't
even trying anymore its goal of imposing--it is not making it a
secret anymore.
They are not trying to hide it, their goal to impose their
authoritarian model of governance on the rest of the world and
crush the free and open rules-based international order.
Indeed, Xi has advertised the CCP's totalitarianism as a ``new
option for other countries and nations who want to speed up
their development,'' while the CCP foreign policy chief has
publicly ridiculed what he refers to as the so-called
international order championed by a few countries.
In the face of this challenge, the United States and Europe
need to stand together once again to defend the democratic
order our parents and grandparents sacrificed so much to
defend. And while there are reasons to be optimistic, much
remains to be done.
This week's announcement of a global grouping of
democracies to counter cyber-attacks illustrates the advantage
that like-minded democracies have over the PRC, assuming we
pose real consequences on the perpetrators of cyber-attacks
including against any countries that condone those cyber-
attacks, yet there is much more work as I said that we need to
do and the stakes couldn't be higher.
On his first foreign trip last month, President Biden
sought to rally our European allies in support of his efforts
to confront the CCP. We saw growing recognition of the threat
posed by the CCP in the joint statements and communiques that
came out of the G7, NATO and the U.S.-EU summits. Of course,
rhetoric is not enough. Commitment and concrete action that
results in Europe charting a tougher, more clear-eyed approach
toward Beijing is what it will take. For example, the
transatlantic alliance must provide a values-driven, high-
standard, transparent alternative to the predatory investments
offered by the CCP.
The launch of the U.S.-initiated Build Back Better World
initiative--which could have used, I think, a better name--at
the G7 summit to compete with PRC's Belt and Road Initiative is
a step toward such an alternative. Yet without serious
commitments from our European allies, this initiative will be
ineffectual, enabling the CCP to continue buying political
influence for investments and trade across the globe.
Unfortunately, despite acknowledging the PRC as a systemic
rival, the EU agreed to enter into a new investment agreement
with China at the end of last year, further tying Europe to a
regime willing to use any economic length as a tool of
coercion. Retaliatory CCP sanctions on European officials who
have criticized the regime's human atrocities and Biden's trip
to Europe have thus far failed to convince key European member
States to end their support for the agreement's ratification.
And I really do look forward to hearing from our expert
witnesses here today on additional concrete steps that the
alliance can take. We must work together with our allies across
the Atlantic to ensure that democracies prevail over the threat
posed by the CCP. And so again, Mr. Chairman, I appreciate you
holding this hearing today and look forward to hearing all the
testimony and asking questions. Thank you and I yield back.
Mr. Bera. Thank you, Mr. Chabot. I now yield 5 minutes to
my friend, Representative Bill Keating, the chair of the
Subcommittee on Europe, Energy, the Environment and Cyber for
any opening comments he may have.
Mr. Keating. Thank you, Mr. Chairman.
For the first time ever, at last month's summit in
Brussels, NATO members agreed that China's stated ambitions and
assertive behavior presents systemic challenges to the rules-
based order, clearly demonstrating the extent of the challenge
China poses to the transatlantic alliance. But I believe also
it shows and exemplifies the determination of the U.S. and our
European allies to rise to this challenge.
It is this determination that inspired Chair Bera, Ranking
Member Chabot, Ranking Member Fitzpatrick, and I to organize
this hearing today, where we will seek to better understand the
current State of European engagement with China as well as how
we might cooperate more closely in the greater Indo-Pacific
region.
The question of how to respond to a rising China has
consumed foreign policy debates in recent years, but a number
of the recent developments bear closer examination.
Economically, China has made a concerted effort to expand its
global influence through the Belt and Road Initiative. In 2020
alone, China invested $65 billion in countries around the world
and that number is only expected to grow in the coming years.
Many of these investments lack transparency and accountability,
particularly in the energy and transportation sectors, and they
are often predatory in nature, putting nations around the world
into grave financial danger.
On the military front, the People's Liberation Army has
grown increasingly assertive throughout the Indo-Pacific. From
border clashes with India to illegal island building in the
South China Sea to increasing frequent incursions around
Taiwan, China continues its efforts to provoke maritime
military conflict. At the same time, China's continued
development with nuclear capabilities and military applications
for emerging technologies like artificial intelligence remain
firmly under wraps.
This lack of transparency only further fosters distrust. We
could talk for much of the time that we are allotted today on
many of the pitfalls of a rising China, but we also need to
take action. That is why the House Foreign Affairs Committee
passed the EAGLE Act out of the markup last week to be voted on
the House floor.
This comprehensive piece of legislation calls for the
revitalization of American diplomacy, leadership, and
investments, globally, in response to the policy changes that
are posed by China. Fortunately, the United States does not
stand alone in its concern about these developments. In June,
the leaders of the G7 joined President Biden in announcing the
Build Back Better World initiative, a project that will advance
both infrastructure and democratic development around the
world. Further, the European Commission is currently drafting a
comprehensive Indo-Pacific strategy, one that will encompass
trade, security, and climate change mitigation and more.
Finally, cooperation is coalescing in the Indo-Pacific as
well. Just last week, President Biden attended the APEC leaders
virtual retreat where he discussed ways to unleash the economic
power of the region and to deepen U.S. economic engagement
throughout the Indo-Pacific, including the recently announced
Build Back Better World partnership.
All these developments represent a growing consensus among
liberal democracies that countering China's authoritarian model
will require a concerted effort on all our parts. The question
now is how the United States and Europe can coordinate and
cooperate to maximize the impact of their policies together in
the Indo-Pacific region.
To answer this critical question, my colleagues and I have
invited a group of incredibly knowledgeable experts with
diverse ranges of professional experiences. They include
Heather Conley and Matthew Goodman, both senior vice presidents
at the Center for Strategic and International Studies; the
Mercator Institute for China Studies' head of China Research
Matt Ferchen; and the Hudson Institute's Peter Rough. As
longstanding experts in the field, you will be able to give us
concrete recommendations on how the U.S. and EU can bolster
cooperation in areas such as infrastructure development,
security, and economic strategy, and we thank you all for being
here today.
Without a doubt, China presents a fundamental challenge on
multiple fronts, but I am confident that working together we
are more than up to the task. History tells us that democracies
are strongest when united and they are the weakest when they
are divided. Countering China and developing a cohesive
strategy in the Indo-Pacific are bipartisan concerns here in
the U.S. and in Europe, and I hope we can use today's hearing
to think about how we can bring together our country's policy
and present a united front.
I look forward to the testimony and to a productive
discussion with all of you, and I turn now to Ranking Member
Mr. Fitzpatrick for his opening statement.
Mr. Fitzpatrick. Thank you, Chairman Keating, also Chairman
Bera, Ranking Member Chabot, for holding this hearing today,
and to our panel of witnesses for being here.
Forging a united coalition with our democratic allies and
partners to confront the autocrats in Moscow and in Beijing is
a national security imperative. Both regimes have engaged in
relentless attacks on the rules-based international order, our
values, and our institutions. And to deter aggression from the
Taiwan Strait to Ukraine's shared border with Russia, the
United States will need to enlist the support of our allies.
Only by rallying the transatlantic partnership can we ensure
that our democracies win out in today's great power
competition.
So today, we will focus on how to build transatlantic unity
to counter the greatest threat of our time, the Chinese
Communist Party. I was pleased to see the emphasis that the
President put on this goal during his recent visit to Europe;
however, that strong rhetoric that resulted from the world's
leaders meeting at the G7, NATO, and the U.S.-EU summit
demonstrated a historic level of convergence, yet the
Administration's work is not even close to being done.
Now it must ensure that these words and sentiments are
followed up with strong action. We must begin by acknowledging
the strength in the transatlantic relationship. For decades,
our European allies have been our closest partners in
addressing shared challenges across the globe. The NATO
alliance in particular has been the cornerstone of an
unprecedented period of peace and prosperity, and I was
encouraged that the final communication of the NATO summit this
past June identified the Chinese Communist Party as posing
``systemic challenges'' to Euro-Atlantic security, and it
asserted that China's--and this is a quote--``coercive policies
stand in contrast with the fundamental values enshrined in
NATO's founding treaty.''
This recognition now requires every ally to assume greater
responsibility for our collective security and resilience and,
as such, the Administration must be willing to insist that our
allies across the Atlantic meet the defense spending pledge
agreed to at the 2014 Wales Summit, ensure the security of
their telecommunications networks, the security of their ports
and other critical infrastructure, and perhaps most
significantly address supply chain vulnerabilities.
We must secure sectors from fundamental and emerging
technologies to include PPE, pharmaceutical manufacturing, and
perhaps most importantly, semiconductors. And I also hope that
the Administration will continue to robustly support the Three
Seas Initiative.
Following Lithuania's decision to exit the CCP's 17+1
initiative, the Administration now has a window of opportunity
that it must take advantage of to provide key Central and
Eastern European allies an alternative to the PRC's financing
and trade through their Belt and Road Initiative. We must fight
back against the CCP's attempts to divide Europe and sow
discord in the transatlantic alliance at every turn.
The U.S., Europe, and the free world also share the
collective goal of eradicating forced labor around the globe,
and yet China continues to sponsor such activities in various
regions. As expressed by this committee earlier this year
through House Resolution 317, the CCP has committed crimes
against humanity in genocide against the Uyghurs. We must not
be afraid to name, shame, and sanction any entity that engages
with any supply chain compromised by forced labor and genocide.
Moreover, despite the growing Chinese presence in Europe and
U.S. markets, reciprocal access has not been granted in Chinese
markets.
The CCP has blocked foreign investment in infrastructure,
technology, and the financial services industries while
increasing activity in these sectors abroad. While the EU-China
Comprehensive Agreement on Investment seeks to address these
issues along with the CCP's forced labor practices, it falls
exceedingly short and I hope that the European parliament
continues to block the agreement's ratification; that the
remaining advocates in Europe who believe economic engagement
with the PRC can transform into a responsible stakeholder that
they will realize that this assumption is not only flawed but
it is dangerous. We must remember that China's intent is not to
sow balanced trade relationships across Europe, rather, it is
to make the Western world into mere consumers.
And I am hopeful that the establishment of the U.S.-EU
Trade and Technology Council, if used effectively, can provide
a needed venue through which to address the points of friction
in the transatlantic relationship that have impeded building a
united coalition against the Chinese Communist Party. However,
unless Europe is willing to cease targeting U.S. technology
companies and be more clear-eyed about the threat posed by the
Chinese Communist Party's unfair and illegal economic practices
and its digital authoritarianism, this Council could end up
being nothing more than talking shop that achieves little.
It is my hope that our witnesses today can address what
more can be done to transform the strong rhetoric on the threat
posed by the CCP in a necessary and united action. The time is
now to build that unified front.
Mr. Chairman, I yield back.
Mr. Bera. Thank you, Mr. Fitzpatrick. And again, I would
like to add my thanks to the witnesses to what Mr. Keating had
mentioned and welcome Mr. Matthew Goodman from CSIS as well as
Heather Conley from CSIS, Dr. Matt Ferchen from the Mercator
Institute, and Mr. Peter Rough from the Hudson Institute. I
want to thank all of you for participating in today's hearing.
I will now recognize each witness for 5 minutes and,
without objection, your prepared statements will be made part
of the record. And again, my staff has informed me that Mr.
Goodman has a hard stop at 4 p.m. this afternoon so we will
keep that in mind. And with that, Mr. Goodman, let me call you
for 5 minutes of your testimony.
STATEMENT OF MR. MATTHEW GOODMAN, SENIOR VICE PRESIDENT FOR
ECONOMICS, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES
Mr. Goodman. Thank you, Mr. Chairman, and thanks to you and
Chairman Keating and the ranking members for inviting me here
today for this opportunity. And I apologize about that 4 p.m.
hard stop, but just unavoidable I am afraid.
In my written statement for the record, I offered more
detailed thoughts on U.S.-EU cooperation on China and the Indo-
Pacific. Here, I just want to make one basic point which is
that the United States needs a credible and affirmative
economic strategy in the Indo-Pacific region. I say that for
three reasons.
First of all, because that is where the money is, as Willie
Sutton might have said. Second, because we have critical
strategic interests in the Indo-Pacific that our military
presence alone cannot address. It needs to be complemented with
a long-term economic commitment to the region. And third,
because it is in the Indo-Pacific that economic rules and norms
are most fiercely contested and where we have to up our game.
It is on this third issue that I think Europe's perspective
on the region has shifted most. Increasingly, Europeans are
seeing the Indo-Pacific not just as a place of economic
opportunity, but as a theater of what the European Commission
itself has called systemic rivalry. Americans and Europeans do
not agree on everything, but there is a growing convergence of
views on the shared interests and values we have at stake in
the Indo-Pacific.
The coordinated statements yesterday on the cyber hacking
by China is an example of some of this convergence, I believe.
It was also visible on President Biden's recent trip to Europe
both in the G7 Summit in Cornwall and in the NATO and U.S.-EU
summits.
Let me just single out two promising areas of cooperation
from the long list of important issues discussed at those
summits. First, the establishment of U.S.-EU Trade and
Technology Council provides an important platform to align
transatlantic views and policies on protecting and promoting
critical technologies, supply chains and, importantly, on data
governance. The rules around data in particular, data flows and
privacy and security of data are critical and the U.S. and EU
need to find common ground in this area and then align with
partners in the Indo-Pacific.
A second promising area of cooperation from the Biden trip
was infrastructure as has been mentioned. As you know, G7
leaders agreed to launch a new Build Back Better World or B3W
initiative. In essence, B3W is about offering a high standard,
transparent alternative to China's Belt and Road Initiative in
meeting the 40 trillion dollars-plus of needed infrastructure
in the developing world.
The key to this initiative lies in mobilizing the 100
trillion dollars-plus of pension and insurance funds and other
private capital in G7 countries to invest in infrastructure
projects around the world. But infrastructure is a difficult
business even here in the United States, or so I am told, and
governments are going to have to put skin in the game if they
want to pull private capital in.
Three specific areas where government resources could be
usefully directed: First, project preparation facilities
offered by multilateral development banks, the EBRD. The
European bank has a great program, for example, in this area in
project preparation, but also bilateral agencies like the USTDA
does this as well. This is important to developing a pipeline
of so-called bankable projects that private investors will want
to put their money in.
A second area is first loss guarantees and insurance
programs offered by MDBs and the U.S. Development Finance
Corporation to compensate investors if losses exceed a certain
level. Third, is capacity building in recipient countries. In
my written statement, I mention the promising initiative
launched by the Trump administration called the Transaction
Advisory Fund, under which we drop lawyers and aid officials
into countries to help them negotiate contracts. This is a
great idea. The amounts of public money to do all these things
are not huge, certainly not by comparison with China's spending
on Belt and Road or with the potential U.S. private capital
that could be unleashed.
Let me conclude by going back to my first point about a
credible economic strategy in the Indo-Pacific. To me,
credibility depends both on what we have to offer and how we go
about offering it. Honestly, the United States has been on the
back foot in the Indo-Pacific since we withdrew from the Trans-
Pacific Partnership in 2017. First best, in my view, would be
to get back to something like TPP. But if we are not going to
do that we need an array of economic policy offerings in
infrastructure, in clean energy, in women's economic
empowerment, or other issues that resonate in the region.
As for the how, two points here. First, we need to get some
things going quickly to demonstrate our credibility, whether
pilot infrastructure projects under B3W or docking onto the
data governance work that is already underway in the Indo-
Pacific, as I suggested in a recent piece that I wrote. The
other point about the how is that we need to work with allies
and partners on all of this. The issues are too big and the
competition too great to go it alone.
Working with our European partners is a great place to
start, which is why I welcome the subject of this hearing.
Thank you for your attention and I look forward to the
discussion.
[The prepared statement of Mr. Goodman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Bera. Great. Thank you, Mr. Goodman.
Let me now go to Dr. Matt Ferchen for your testimony.
STATEMENT OF DR. MATT FERCHEN, HEAD OF GLOBAL CHINA RESEARCH,
MERCATOR INSTITUTE FOR CHINA STUDIES
Dr. Ferchen. All right. Thank you to Chairs Bera and
Keating, Ranking Members Chabot and Fitzpatrick, and to the
distinguished members of both subcommittees for having me here
today for this important discussion. My comments today will
focus on growing interest in Europe and the Indo-Pacific
region, how emerging European Indo-Pacific strategy is a factor
into Europe-China relations more generally, and what this all
means for U.S.-Europe cooperation on China and in the Indo-
Pacific region.
First, a few words of background on rising European
interest in the Indo-Pacific. Beginning in 2019, a number of
European countries began to issue strategy documents on the
importance of the Indo-Pacific. France was the first to issue
such a document in 2019 and was then followed by Germany and
the Netherlands in 2020.
Not to be outdone, post-Brexit U.K., just this March,
announced its commitment to a revitalized role in the Indo-
Pacific, declaring itself the best European partner for the
region on trade, security, and values. Back in the EU, the
French, German, and Dutch Indo-Pacific policy documents all
argued for the importance of a coordinated EU-level, Indo-
Pacific strategy. This push resulted with the European Council
in April of this year issuing a draft EU strategy for
cooperation in the Indo-Pacific.
To give you an idea of the aim of the proposed strategy, it
begins by stating, ``The EU should reinforce its strategic
focus, presence, and actions in the Indo-Pacific with the aim
of contributing to the stability, security, prosperity, and
sustainable development of the region based on the promotion of
democracy, rule of law, human rights, and international law.''
This April policy document does not yet represent the
conclusive EU strategy for the Indo-Pacific and EU officials
will potentially finalize their approach this September, but
the broad outlines are now in place. How does this renewed
European emphasis on the Indo-Pacific fit into the broader
Europe-China relationship and what is the significance for
U.S.-European cooperation on China and in the Indo-Pacific?
To answer the first question, growing European emphasis in
the Indo-Pacific takes place against the background of a
broader rebalancing of Europe-China relations. Since at least
2016, the EU and member EU States have stressed the need to
balance the benefits of economic engagement with China against
the risks and challenges posed by China's authoritarian
trajectory at home and abroad. The result was the EU's 2019
three-part formulation of China as a partner, competitor and
systemic rival, a balance that also affects European
calculations in the Indo-Pacific.
On the other hand, as the EU and different countries in
Europe seek to strike a balance in their relations with China,
a focus on the Indo-Pacific underscores the importance of the
region beyond just China. For example, European Indo-Pacific
strategies stress the economic vitality of ASEAN and of EU-
Southeast Asia relations. Japan, Korea, and Taiwan also feature
prominently in European discussions about options for enhanced
supply chain resilience.
With an eye toward China, there is also a strong emphasis
on working with like-minded partners in the Indo-Pacific to
strengthen democratic governance, the rule of law, and defense
of human rights. On the other hand, while China is clearly the
elephant in the room in terms of European approaches to the
Indo-Pacific, the EU and individual European countries have
emphasized that their approach to the region is inclusive
rather than exclusive, including openness to cooperation with
China on certain issues such as climate.
Further, the EU's Indo-Pacific framework contrasts the need
for cooperation in the Indo-Pacific against concerns about
geopolitical competition in the region including U.S.-China
rivalry that threatens to undermine regional security and
stability.
With all this in mind, I will conclude with a few
recommendations about areas of U.S.-European cooperation in the
Indo-Pacific and also a caveat about potential friction points.
Issues with the most potential for cooperation include the
following: First, given already increased transatlantic
coordination on human rights and values, including with respect
to Xinjiang and Hong Kong, a joint U.S.-European focus on the
Indo-Pacific could also pave the way for greater coordination
on the ongoing political and humanitarian crisis in Myanmar,
for example.
Second, in terms of Indo-Pacific regional stability and
security, while the U.K. and France are the two European
countries most likely to commit to NATO and other traditional
security cooperation in the Indo-Pacific, the EU and countries
like the Netherlands are keen to work with the U.S. and other
partners to strengthen maritime rule of law, for example, as a
key pillar in the maintenance of regional stability.
Third, there is a growing emphasis on the need for more
coordination with the U.S. and other countries in the Indo-
Pacific on enhanced supply chain resilience. Last, but
definitely not least, in the wake of the G7 summit and the
proposed Build Back Better World agenda, there is momentum for
enhanced U.S.-European cooperation on infrastructure,
financing, and construction in the Indo-Pacific, including in
the areas of energy and digital infrastructure.
Let me close on a more sobering note about the most
important potential stumbling block in U.S.-European
collaboration in the Indo-Pacific. Any effort by the U.S. to
explicitly frame cooperation with European partners in the
Indo-Pacific as part of an anti-China coalition will likely
receive a frosty response in Europe. Effective U.S.-European
cooperation in the Indo-Pacific and on China require deft
diplomacy and, above all, a solid understanding of complex
realities within the Indo-Pacific region itself.
Thank you for your time and I look forward to our
discussion.
[The prepared statement of Dr. Ferchen follows:]
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Mr. Bera. Thank you, Dr. Ferchen.
Let me now call on Ms. Conley for her testimony.
STATEMENT OF MS. HEATHER CONLEY, SENIOR VICE PRESIDENT FOR
EUROPE, EURASIA, AND THE ARCTIC, DIRECTOR, EUROPE, RUSSIA, AND
EURASIA PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES
Ms. Conley. Chairman Bera, Chairman Keating, Ranking Member
Chabot and Fitzpatrick, thank you so much, as well as the
distinguished members of both subcommittees, for not only the
opportunity to speak before you this afternoon, but holding
this as a joint committee hearing. We, bureaucratically, all
too often silo our regional expertise and, unfortunately, our
strategic competitors take full advantage of that.
Our Asian experts need greater understanding about European
political and economic dynamics, and Europeanists need a deeper
understanding of China's internal and external policies, so
thank you so much for leading by example and I hope you will
hold more types of these joint committee hearings.
Very briefly, I would just like to highlight four strategic
and security points gleaned from my written statement. First,
we have a unique opportunity to strategically reposition the
Atlantic world to meet the China challenge but our allies
cannot be viewed as burdens to bear, but as the unique
strategic assets that they present to the United States. But
harnessing the strategic asset is not going to be easy and,
most importantly, we cannot conduct transatlantic business as
usual.
And I think Ranking Member Fitzpatrick noted that, for
example, the Trade and Technology Council cannot be a talking
shop. We have to move policies forward. The U.S. cannot inform
allies of decisions taken under the guise of consultations. We
actually have to consult with them. Transatlantic problems
cannot--must be solved in a timely way. We cannot allow
problems like the Airbus-Boeing dispute to go on for 17 years.
We have to address them immediately.
Tough allied love must be administered by the U.S. from
time to time to our allies. We shouldn't shy away from making
tough and difficult points. And, finally, the U.S. must deeply
invest, diplomatically and economically, in Europe, because a
weaker Europe will be much more susceptible to Chinese and
Russian influence and unable to support the U.S. in its policy
objectives.
We really have a very unique moment. The United States in
our National Security Strategy and Global Posture Review,
national defense strategies, NATO's updated Strategic Concept,
and the European Union's Strategic Compass, all of these
strategies must align vis-a-vis China. But again, let's be very
clear. This is going to be a very difficult task, and in some
ways, yesterday's unified statements between the United States,
NATO, and the EU on the Chinese cyber-attack against Microsoft
Exchange servers is a perfect example of this.
The U.S. statement was very explicit in attributing the
attack to Beijing. NATO's statement acknowledged that some
individual allies had attributed this attack, but were careful
to note that the organization did not make that attribution.
And, of course, the EU statement was even more carefully
crafted to note that malicious actors were hacker groups that
happened to be conducting those attacks from the territory of
China. This is not to criticize the importance of yesterday's
unified statement, but it does underscore how painful and slow
this process is going to be to reposition our allies for a
unified approach toward China.
My second point is that the U.S. must be very realistic
about what and where our European allies can help deliver,
particularly in the security realm related to China. Our NATO
allies can deliver greater security presence in the Indo-
Pacific, particularly the United Kingdom and France. In fact,
today's announcement that the United Kingdom will permanently
deploy two Royal Navy offshore patrol vessels in the Indo-
Pacific coupled with its inaugural deployment of HMS Queen
Elizabeth Carrier Strike Group in the Indo-Pacific this fall
are really important examples of that contribution.
Yesterday's announcement by France that it was facilitating
a South Pacific coast guard network against Chinese illegal
fishing is another example of important allied contributions.
NATO allies also contribute to the annual RIMPAC exercises.
Again, these are all very important demonstrations of allied
commitment to greater security in the Indo-Pacific.
But I believe it would be an error to push European allies
to shift their limited military capability too much to the
Indo-Pacific, rather, we need to encourage our allies to
contribute to press with speed at increasing their readiness
and defense capabilities in the Euro-Atlantic area with some
military contributions toward the Indo-Pacific. But, equally,
our European allies must concentrate on Chinese presence in
Europe today and its security implications, be that hard or
digital infrastructure as well as technology acquisition or
theft.
There is important progress happening in Europe, but it has
to go more quickly and the U.S. needs to stand shoulder-to-
shoulder with Europe to ensure that Europe is safe from Chinese
malign influence.
My third point, and this is to reiterate what Matt Goodman
noted, the Atlantic community must succeed in the innovation
and digital competitiveness race. Again, we cannot have
business as usual. We have to work more closely with Europe to
ensure that it does not miss the next decade of technological
advancement, and this is where we are struggling. We need a new
strategic approach to make sure that Europe remains digitally
competitive and can made a contribution to emerging
technologies.
Finally, the thing that I think is most missing in our
thought process is that the U.S. and our European allies must
be able to simultaneously manage the Russia and China challenge
set and prepare for more Sino-Russian dynamic alignment between
our two near peer military competitors. This is not the cold
war when all geostrategic focus and attention could be devoted
to the Soviet Union and the global spread of communism. We must
prepare for both strategic competitors to engage in
simultaneous and destabilizing behavior against the West.
This alignment will stress-test allied military,
diplomatic, and economic responses and suggests that more joint
hearings of this nature must be held to understand how this
Sino-Russian alignment can be used against the West. Thank you
again, and I look forward to your questions.
[The prepared statement of Ms. Conley follows:]
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Mr. Bera. Thank you. And let me go ahead and call on Mr.
Rough for his testimony.
STATEMENT OF MR. PETER ROUGH, SENIOR FELLOW, HUDSON INSTITUTE
Mr. Rough. Thank you very much, Chairman Bera and Keating,
Ranking Members Chabot and Fitzpatrick, distinguished members
of the subcommittees, thank you all for the opportunity to
appear before you today. Mr. Chairman, I would like to
supplement my written testimony with just a few additional
remarks in the time you have granted me.
We meet 6 months almost to the hour that President Biden
took the oath of office as the 46th President of the United
States. From his first days in office, the President, who has
long enjoyed a reputation as an Atlanticist, has prosecuted a
full-fledged charm offensive toward Europe. Under the mantra of
Build Back Better, the Biden Administration has showered Europe
with a bevy of diplomatic initiatives and coordination.
In the process, however, the Biden team must also guard
against a conceptual mistake. Europe has interpreted the
President's early embrace to mean that Washington's highest
priority is transatlantic harmony. This perception is
especially strong in Brussels and Berlin, the two partners the
Biden Administration has courted most assiduously. The result,
that neither feels compelled to move significantly beyond their
current policy preferences. The risk is that transatlantic
policymaking will be defined by the lowest common denominator
of agreement as it stands today, a landing zone which may be
too modest to tackle the urgent challenges we face.
The recent experience with the Nord Stream 2 pipeline is
merely a harbinger. It is an open secret in Berlin that the
Biden Administration is unwilling to risk its reset with
Germany by mobilizing against the project. A similar dynamic
may undercut the scope of U.S.-European cooperation on the
subject of our hearing today, the People's Republic of China.
That we need an ambitious agenda is indisputable. The
challenge of our time is to defend free and open societies from
malicious actors in an era of globalization and by far the most
formidable of these threats is the PRC. China is moving
aggressively to assert dominance of the international system.
In particular, it seeks to master the critical technologies
that will determine the future balance of power, a goal it
pursues through theft of intellectual property on a mass scale,
an unprecedented scale, in defiance of global trading rules.
Six months into the Biden Administration and the U.S. has
inaugurated working groups under the newly established Trade
and Technology Council. I, like my fellow witnesses and as
Ranking Member Fitzpatrick noted, welcome the so-called TTC as
a forum for broad-based discussion. But the U.S. must
accelerate and intensify its work by offering concrete
proposals. U.S. foreign policy is most effective when it drops
a firm anchor that pulls partners and allies in its direction.
Far from alienating our allies, such leadership drives
discussions forward and expands the possibilities for
cooperation. In that sense, in whatever disagreements may arise
with Europe, the U.S. should not underestimate its own power of
persuasion in putting forward specific goals. The Clean Network
alliance of recent years serves as a great example of this
principle.
Today, in the area of export controls, for example, the
U.S. should consider proposing a robust, multilateral export
mechanism modeled after the cold war era Coordinating Committee
for Multilateral Export Controls. This is an ambitious
objective, but it should be an American priority given the
speed with which China is seeking out Western technologies.
Of course, China has made clear that it will retaliate
against any transatlantic effort to strengthen export controls
or for that matter tighten investment screening and combat mass
cyber theft. To cushion the blow of retaliation, it is
important that the U.S. forge as large a zone of free and
independent countries that are aligned on China policy as
possible. In that vein, the Biden Administration must not lose
sight of the Europe that exists beyond Brussels and Berlin.
Just recently, for example, the Polish Foreign Minister
registered his disappointment over discovering from the media
that the Biden Administration had waived Nord Stream 2
sanctions, or select Nord Stream 2 sanctions. To counteract the
damage, the Three Seas Initiative is a worthy project that will
strengthen the continent's resilience also against China. It
deserves the continued support of Congress and the
Administration.
American leadership of the transatlantic alliance,
especially if linked to that of our Asian allies--and so I echo
Heather Conley's point that this subcommittee joint hearing is
really an excellent format--really unlocks a range of
possibilities and strengthens our position toward China. By
contrast, an uninspired agenda that focuses on process as
Europe hedges toward China will vastly diminish our position in
the competition over the future world order. To avoid that
scenario, it is time to turn our newfound harmony into tangible
outcomes. Thank you very much.
[The prepared statement of Mr. Rough follows:]
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Mr. Bera. Thank you for your testimony. I will now
recognize members for 5 minutes each, pursuant to House rules.
All time yielded is for the purpose of questioning our
witnesses. Because of the full format of this hearing, I will
recognize members by committee seniority alternating between
Democrats and Republicans. If you miss your turn, please let
our staff know and we will circle back to you. If you seek
recognition, you must unmute your microphone and address the
chair verbally. I will start by recognizing myself.
First off, to the witnesses, thank you for recognizing the
importance of bringing both the Subcommittee on Europe and
Subcommittee on Asia together. I think it does really underline
that in the 20th century we had a transatlantic strategy, we
had a transpacific strategy, but one thing we did not do quite
effectively was lay out a strategy to bring both together.
And often the Chinese will characterize this as, well, this
is an anti-China strategy and I know from my perspective, I
actually see this as an affirmative strategy which affirms, as
I said before, the values that we believe in of free market
competition, a rules-based order, protection of intellectual
property.
Competition is fine and none of us fears competition with
China, but we just see the direction China is going under Xi
Jinping, so I think we have to present an affirmative set of
values again of human dignity and human rights. And I think if
we do that we actually present a framework that for the
countries in the Indo-Pacific, they are not choosing a positive
or anti-China strategy, they are choosing a strategy based on
the values that countries like Korea some of the countries in
the ASEAN block really value.
So I really do think it is imperative for us to present an
alternate strategy.
Mr. Goodman, you presented four areas where you think there
is cooperation. I am going to touch on one of them which was
kind of outlined in the Build Back Better World initiative, and
that is the infrastructure financing component. And I think if
I heard the number correctly, you said there is about a hundred
trillion dollars of pension funding that could be leveraged to
help us finance international projects which would far surpass
what the Chinese are putting out there.
What are the barriers and things that we would have to
address if we wanted to unlock some of the potential of U.S.
pension funds or even European pension funds to be able to
safely finance some of these projects?
Mr. Goodman. Thank you, Mr. Chairman, great question. It is
really a critical one because our whole sort of model and
offering depends on the ability to mobilize this private
capital. It is easily over a hundred trillion dollars if you
count all pension funds, insurance funds, long-term funding, or
funds that have long-term liabilities they have to pay out over
a long period of time.
They are looking for long-term assets like infrastructure
to invest in, so in principle it is a great opportunity. The
problem is again, even here in the U.S. or the advanced world,
infrastructure is a very difficult business. It takes longer,
costs more, there is frankly, even corruption and other
problems in the advanced world. You imagine in a lot of the
developing world, you have all those problems, plus all kinds
of legal questions and environmental and social challenges, and
there are just not enough clearly identifiable opportunities
and so-called bankable projects.
That is a term that has become kind of a cliche, but it is
an important term in the sense of there need to be projects out
there that private capital wants to go into, so I think that is
why I think project preparation, trying to identify potential
projects and help lay the groundwork is a really good place to
start. That does require some money. Not a lot, but we need to
do that through our own bilateral mechanisms like the DFC, the
USTDA, and then also through multilateral development banks.
And then as I say, guarantees other sort of risk mitigants that
make private capital feel that there is government skin in the
game and that they won't take all the losses if a project
doesn't work out is important.
And as I say, this critical issue of capacity building,
which is the last point I will make, which feeds back to your
point about what we are offering that is appealing, I really
think I was in a Southeast Asian country a couple of years ago
and I met with the sort of senior person in charge of their
kind of development and internal inbound investment strategy.
And we talked quite frankly about Chinese offerings and Belt
and Road and other ways, and this person said, ``Look, we do
not want that stuff. We know what it comes with, but you guys
aren't offering anything. You know, if you came forward with
some actual money, but also the capacity to help us build
better projects with the rule of law, with good support
mechanisms around the infrastructure, then we will buy American
stuff any day.''
So I think that is the key. It does require putting some
money on the table.
Mr. Bera. Great. Thank you for that answer. So let me go
ahead and recognize the ranking member of the Asia
Subcommittee, Mr. Chabot.
Mr. Chabot. Thank you, Mr. Chairman.
Mr. Rough, I will go to you first, if I can. The Biden
administration has prioritized revitalizing the transatlantic
alliance and reassuring Europe that as they like to say,
``America is back.'' My concern is that this is just talk and
that it is not clear what we are getting in return, so a couple
questions.
First, thus far, what tangible return on these efforts have
we seen, and do you believe the Biden Administration is
prepared to have the difficult but necessary conversations
about, for example, the Europeans actually meeting their 2
percent obligations under their NATO commitment and increasing
their military expenditures?
So we will leave it there at this point. How would you
respond to those questions?
Mr. Rough. Well, thank you, Congressman. Let me perhaps
just begin with the last point on NATO. A third of NATO now
meets its Wales pledge of spending 2 percent of their GDP on
defense. France and Norway just crossed that threshold which is
a welcome development, but more needs to be done. More progress
needs to be made in this domain and it does connect to the Asia
Pacific region.
In the event of combat in Asia Pacific, if there is, for
example, a war over Taiwan, the real question is whether or not
the United States Navy at a level of 290 ships or so would be
able to both supply the Asia Pacific and ferry troops across
the Atlantic if, simultaneously, there was a crisis of sorts in
Europe. So this is not a question of American harmony, of
American willpower, it is a real question of American
capabilities and whether or not they are not strained. And so
Europe has to pick up the slack, and I think urgently making
that case is hugely important.
On the subject of transatlantic coordination, I think there
have been a few positive examples on, for example, Belarus,
where the United States has worked well with the Europeans on
coordinating statements. There have been a bevy of releases
including the Microsoft hack that was just raised. But on the
major fundamental questions that are still outstanding on the
big transatlantic sort of existential questions, we still need
progress and we will see what the Administration produces in
the coming months and years.
Mr. Chabot. Thank you. I will stick with you, Mr. Rough. I
am one of the founders of the congressional Taiwan Caucus and
one of the co-chairs, currently, of it and so I would like to
ask you about Europe's position on Taiwan. In a first, this
year, the G7 communique underscored ``the importance of peace
and stability across the Taiwan Strait.''
In your opinion, what more should the transatlantic
alliance do to counter the PRC's growing diplomatic and
military pressure against Taiwan?
Mr. Rough. Well, Heather Conley has already outlined a few
of the deployments that are ongoing, which I do think are
helpful. Beyond that I think developing a common strategic
picture is useful, and the U.S. can do that by facilitating
connections between our European allies and those frontline
States who have really felt the brunt of Chinese aggression and
ruthlessness of late.
The United Kingdom, for example, in the wake of the
aggressive erasure of freedom in Hong Kong and subsequently of
the moves against Australia on the trade front, has toughened
its line, given its natural and historic links to both of those
areas, on China. And I think the more that we can connect up on
the ministerial level, for example, of 2+2 of defense and
foreign ministers of our Asian allies, Australia, and Japan, in
particular, and our European partners, that will be helpful.
But principally, this is really an American sphere of
military action and what I would like to see is for the
Europeans to alleviate American pressure in the Asia Pacific by
having a solid presence in the Mediterranean and the North
Atlantic perhaps east of Suez and the North Indian Ocean.
Mr. Chabot. Thank you. And let me squeeze one more
question. The previous administration's efforts to counter the
Chinese telecommunications firm Huawei including through the
Clean Network initiative were quite successful. Do you assess
that the Biden Administration is building on this progress to
ensure the safety of telecommunications networks in Europe?
Mr. Rough. I think that is an open question. Clearly, there
is bipartisan agreement on the importance of keeping 5G clean,
on keeping next generation telecoms amongst our allies clean,
and so in that sense I would say yes. Beyond that though, I
think we really need to push for and address how we can
extricate ourselves from supply vulnerabilities by providing
alternatives.
And here there is questions about where strategy is going.
Are we and the European separately going to pursue a form of
industrial strategy, for example, on next generation
technologies or can we work together as we did in decades past
through basic research funding, perhaps relaxing some
competition rules and thereby generating some consortiums of
transatlantic private sector companies to push forward the
frontiers of semiconductors, for example, and then it will be
easier for our allies to feel less the sway or less the
pressure of the Chinese.
So I would say the jury is still out but I am hopeful.
Mr. Chabot. Thank you. My time has expired, Mr. Chairman. I
yield back.
Mr. Bera. Great. Thank you, Mr. Chabot. Let me go and
recognize the chairman of the Europe Subcommittee, Mr. Keating.
Mr. Keating. Thank you, Mr. Chairman. I want to followup on
Ms. Conley's testimony where she cited the China-Russia
relationship. Surprising to many people over the last few
years, myself included, the level of cooperation with China and
Russia really reaching unprecedented highs, President Xi
Jinping and Putin have both praised the comprehensive
partnership and strategic cooperation between the two
countries, and the leaders of both governments have recently
underscored the steady development of these ties, taking them
further, and there are many fronts.
If you could, first, Ms. Conley, and then anyone else who
might want to jump in, just detail some of the key areas of
cooperation, strategically, and where we should be the most
concerned. No. 2, let's still remember there are differences,
maybe you want to cite, if you could, some of those differences
and how it could be problematic for the two countries going
forward. And three, actually citing a great example of how to
counter this, the programs like the Three Seas Initiative where
it has already launched the response to Chinese economic
influence in Europe, how do initiatives like the Three Seas
play into the Biden Administration's revitalization approach to
transatlantic response to China and how can these programs,
programs like the Three Seas Initiative, those types of
programs address the Russian-Sino cooperative influence?
Ms. Conley. Chairman Keating, thank you so much for that
question. We have actually been very focused on understanding
Sino-Russian military cooperation so I will speak to that. But
I will say, I think the analytical community had been a little
lazy, to be honest with you. We kept calling this dynamic
alignment a marriage of convenience, that this was something
that we historically did not see evolving. And I think we have
to really now begin our assessment with a more enduring
alignment.
This is not an alliance, let me be clear, but it is an
alignment of interest between Moscow and Beijing and,
increasingly, Moscow is looking toward Beijing for economic
support whether that is Arctic energy development, whether that
is looking at technology, surveillance, we are seeing that
growing economic focus, and then what we are seeing now is a
more fruitful partnership.
So for the last several years, beginning back in 2018, the
Chinese military and Russian military exercise annually in
Russia's annual military exercises. We have seen naval
interaction in exercising well before 2015 as far afield as the
Russian far east, the eastern Mediterranean, and the Baltic
Sea. We are increasingly seeing arms transfers between Russian
arm sales to China, but as China is seeking the more
sophisticated military equipment they are now acquiring greater
Russian military technology.
Watching air exercises between Russia and China in the
Indo-Pacific is another example of this growing flexible
dynamic militarily, and that is something we really do need to
understand, particularly in a two-front conflict, if you will.
So a scenario where Russia begins to exert pressure in northern
Europe militarily; China simultaneously exerts even more
pressure on Taiwan in the Taiwan Straits that would pose an
enormous challenge to our allies, so keeping that focus
militarily.
What we are seeing though as Russia and China interact
globally, so Serbia is a perfect example, even in the Sahel in
Africa we are seeing compartmentalization, meaning that they do
stay out of each other's way. But, increasingly, I think that
is going to be more challenge, particularly as China grows its
economic role in these countries and Russia is unable to
maintain a stronger economic relationship. But Russia may have
different influence touch points, if you will. Will we see some
friction as Russia is challenged in its traditional clients
with, because of Chinese largesse. So we are seeing that
compartmentalization.
And, finally, sort of thoughts on the Three Seas
Initiative, and I think this is where quite frankly, whether it
is Chinese malign economic influence or Russian malign economic
influence, both thrive on lack of strong institutions, norms,
transparency, strong voice for civil society and organizations.
So in some ways, just to hearken back to what a previous panel
has said, we cannot continually harp that this is an anti-China
dimension. We have to start talking about these plans as
strengthening the West, strengthening this Atlantic world, and
we do that by quality infrastructure that respects
environmental protections and norms, does not go into the
pockets of cronies and political parties and leaders, that we
are showing that quality is so much better than short-fix
quantity.
That is a difficult process, but that is where that deep
diplomatic and economic engagement is vital. Thank you.
Mr. Keating. Yes, I yield back, Mr. Chairman.
Mr. Bera. Great. Let me go ahead and recognize my good
friend from the State of Illinois, Mr. Kinzinger.
Mr. Kinzinger. Okay, thank you, Mr. Chairman, and thank you
to all our witnesses for being here. Let's get right to it.
Question for Mr. Rough and Ms. Conley. As we know, the Biden
Administration waived congressionally mandated sanctions on the
Russian malign influence project that we know as Nord Stream 2.
Let me ask you both and I guess I will start with Mr. Rough,
first.
Do you believe that the Administration did this with the
hopes that Germany--and it was, of course, the main beneficiary
of a completed pipeline--would cooperate in pushing back
against the CCP? And if you do believe that, let me ask you if
we have seen any stronger take by Berlin from that.
Mr. Rough. I do think that that is part of the calculation.
The Biden team's thinking, if I could summarize it perhaps in
somewhat crude terms, if there is a form of almost Kissingerian
triangulation in Europe, they want to pull the Germans a bit
away from the French idea of strategic autonomy, and then in
the broader international arena, pull Europe led by Germany
away from China.
And so I do think that that was part of the rationale. I am
not sure why we had to link China policy to Nord Stream 2 and
Europe. Those two strike me as unrelated and, quite frankly,
the Europeans complained about linkage extensively during the
Trump years, yet here, apparently, we are exercising that.
We also, I think, had a rather disappointing visit of the
Chancellor to Washington. There was a lot of talk leading up to
that. She came, of course, just a few days ago that there would
be an agreement on Nord Stream 2, some sort of managed process,
but in the end, nothing was really delivered. And I am not sure
what the Europeans can deliver on that to assuage, or the
Germans could deliver to assuage the concern of the Eastern
Europeans.
One last point, the transit fees on Nord Stream through
Ukraine run about 2.5 billion a year. The Three Seas
Initiative, the major sort of crown jewel funding apparatus for
that, announced at the Munich Security Conference in February
2020 is a one billion-dollar American commitment. So you can
see how there is a bit of a gap between both the ambitions and
the scope and size of Three Seas, even if it is built out, and
what just in purely commercial terms the transit fees mean for
the Ukraine, to say nothing of the geopolitical impact that
this decision will ultimately have.
Mr. Kinzinger. Thank you.
Ms. Conley.
Ms. Conley. Yes, I believe the Biden Administration is
certainly prioritizing in the first 6 months healing in our
allied relationships and, certainly, the German, U.S-German
relationship was severely damaged over the last 4 years. But as
I said in my opening statement, we have to be able to apply
what I call tough allied love, and I believe the Biden
Administration should have continued to press the German
Government to make much more significant concessions. They are
isolated within Europe on Nord Stream 2. Unfortunately, this
has not stopped them from pursuing this.
And I agree with Peter that the visit of Chancellor Merkel
was an opportunity for the German Government to offer
concessions for a pipeline that clearly the Biden
Administration has accepted as constructed. I do not think I
would have given up that easily. I would have fought until the
very end, and it is not because we want to damage or fray our
relationships. It is because we believe in this relationship
and it is so important, we have to continue to fight for it.
I do not believe it was linked to China or to the
Comprehensive Agreement on Investment. In some ways, this is
not really about Russia, per se, this is about Germany and
German policy and how it is going to approach challenges like
Russia, like China, and I think we should have fought a little
harder for more.
Mr. Kinzinger. I agree. And I think too it is important to
note that we reversed the decision, which was the right
decision to reverse it. We reversed the decision to withdraw
troops and I think that is to an extent a given as well.
Let me ask you in the minute I have remaining, Mr. Goodman.
We talk about supply chain vulnerabilities, obviously, that was
brought to light during the COVID pandemic, and understanding,
for instance, the threat to cutoff PPE and the real damage that
could do, how can we be working with the EU to help to counter
some of those supply chain issues? I know it is only 45
seconds, but if you want to top-line it that would be great.
Mr. Goodman. Well, thank you, Mr. Congressman. That is a
really important set of issues around supply chains that as you
know the Biden Administration announced this for his hundred-
day review. One of the issues was the pharmaceutical and
medical area and came up with some ideas for how we can make
those supply chains more resilient and robust, also
semiconductors, batteries, and our rare earth minerals.
All of that is really critically important and we have to
do it with all of our allies. Europe plays a part in production
of some of the medical and pharmaceutical products and
supplies, and I think they need to be very much part of the
conversation. There is a little bit of a theme or a sense among
some allies that the U.S. really wants to do all this at home
and, understandably, we want to do some of it at home, but we
need to sort of have a bunch of options including production in
Europe, Japan, other trusted allies, so that is, I think, the
key here.
Mr. Kinzinger. Agreed. Thank you. And thanks for the
witnesses.
Mr. Bera. Thank you. And let's try to squeeze one last
round of questions in here and then, unfortunately, votes have
been called. So let's see if we cannot get my good friend from
Rhode Island, Mr. Cicilline, in here and then we will recess
while we go vote.
Mr. Cicilline. Thank you, Chairman Bera and Chairman
Keating, for calling this hearing, and thank you to our
witnesses for joining us today. Once again, the United States
and its partners and allies in Europe have the opportunity to
partner to advance the causes of liberty, democracy, and human
rights and a future dictated not by the long reach of
authoritarianism. And I think to do that we have to be really
strategic about our approach to China and the Indo-Pacific
region, particularly.
So my first question is for you, Mr. Goodman or Dr.
Ferchen. We have seen recently a willingness of China to
increasingly become more adversarial, including in regions
traditionally outside their sphere of influence including Cuba.
And my question is, should the U.S. and Europe expect that
China will become more involved in the regions in which they
were not normally involved in the past and, if so, how should
we think about working together to really prepare for that kind
of involvement?
Mr. Goodman. Yes. No, that is a difficult question,
Congressman, because China on the one hand has not shown
historically, I mean deeply historically, like thousands of
years, interest in going too far beyond its sort of immediate
sphere of influence within the sort of greater Asian region.
Some counter examples, but in large part they have been more
interested in sort of their position in the Asian Pacific.
They are, through Belt and Road, through other means in
supporting Venezuela, Cuba, as you say, they have sort of been
reaching out. Partly this is because they need resources, so
Venezuela, I think, was part of that, the Africa play is a lot
of their need to get access directly to resources as they see
it. They think that is an important strategic play. The problem
for them is that really extends their vulnerability, their
risk, and they do not have, unlike us, they do not have a
global footprint of bases and allies and military capabilities
and they have gotten themselves in trouble.
So there is a bit of a, I think, a shyness too about going
too far out on a limb there. But they have built a base in
Djibouti. They are starting to look at extending that
capability, and I think that is something that we have to be
very alert to, working with allies to ensure that the countries
that are being subject to influence have again an alternative
offering from us that is more appealing than what China is
offering.
Mr. Cicilline. Thank you. The Pegasus Project has revealed
the extent in which leaders from around the world installed
spying software on the devices of opposition leaders and
journalists. This includes, allegedly, Prime Minister Orban of
Hungary.
And my question is, how does China's use of similar
technologies influence the global trend of spying on actors
unfavorable to certain governments and how can the United
States and Europe partner to push back effectively against the
global distribution of similar dangerous technologies that
emerge from the Indo-Pacific region? And I do not know if
anyone has thoughts on that.
Ms. Conley. Well, Congressman, I am happy to jump in. I
think--and I thank you so much for citing the example of
Hungary where we have this is a NATO and EU member and ally
that is openly courting Beijing. Huawei has a technology center
there and, certainly, Mr. Orban has increasingly encouraged
Chinese investment. This is where both NATO and the EU and the
U.S. have failed to have a consistent and credible policy to
make sure that a NATO ally does not continue down this path
because other allies seeing that that is a free pass may be
tempted.
We are seeing particularly in non-EU member Serbia, a
strong relationship where we have Huawei Safe City pilot
projects. CSIS has done extensive research of Chinese influence
in Serbia and across the Western Balkans. This is really
problematic because they are showcasing and modeling
technologies of surveillance of opposition in civil society
which is deeply, deeply troubling. We need a response for that
and as yet the transatlantic community has not effectively
responded to that challenge.
Mr. Cicilline. Thanks. And, quickly, I just want to raise
the issue of human rights. Obviously, Indo-Pacific region is
open to tremendous opportunities economically, diplomatically,
politically but it is also home to a wide variety of human
rights abuses that are really antithetical to the governance
models and human rights regimes synonymous with the United
States and Europe.
And so how should we think about making investments in this
region, but also trying to advance the issue of human rights
and ensure that we are seeing some progress in those key areas
at the same time we are making these investments? I know that
is a complicated question, but if anyone has thoughts on that.
You are going to let my clock run out. Well, give it some
thought and perhaps you can answer that in writing if you have
answers, because I do think that is one of the great challenges
we face.
Mr. Bera. Great.
Mr. Cicilline. Thank you. I yield back, Mr. Chairman.
Mr. Bera. Thank you, Mr. Cicilline.
And knowing that votes have been called for, I am going to
go ahead and recess this subcommittee and hopefully the
witnesses can stay with us. Again, I know we may lose Mr.
Goodman at 4 o'clock, but if the other witnesses can stay, we
will reconvene after our third vote and hopefully it will be on
the shorter end, 45 minutes to maybe an hour.
So at this time, the subcommittee will recess so that
members can vote. The hearing will resume immediately following
the last vote.
[Whereupon, at 3:20 p.m., the subcommittees recessed, to
reconvene at 4:31 p.m., the same day.]
Mr. Bera. The committee will come to order. Again, before I
call on Mr. Perry as a testimony to the importance of this
subject but also to the witnesses, as we were on the floor
voting, both Democratic and Republican members came up and
talked about how interesting this topic was and how important
this topic is.
So it is something that as the two subcommittees work
together hugely important for us to bring our allies together
across the transatlantic as we address some of the challenges
in the transpacific Indo-Pacific region.
And with that, let me recognize my friend from the great
State of Pennsylvania, Mr. Perry, for 5 minutes of questioning.
Mr. Perry. I thank my friend, Mr. Chairman, from the great
State of California.
To the witnesses, the threat posed by the People's Republic
of China represents the foremost existential challenge to the
United States, Europe, and the rules-based international order.
But to me, there is a clear lack of consensus on the question,
and even more so across the Atlantic. To me, it is a sobering
indication that the CCP's intention to create division among
Western allies is actually working. China has been able to
leverage its investment in Europe, including through the Belt
Road investments in Greece, Serbia, Hungary, and even Italy to
weaken the resolve of our EU partners.
The CCP's outside influence in the German economy has
caused the long-serving Chancellor to take a decidedly soft
track on China for fear of upsetting bilateral trade and
investment relations. Notably, Germany is in this position in a
large part due to the Chancellor's disastrous energy wind rapid
decarbonization policy. Germany's policies left them wholly
reliant upon the CCP for the component minerals necessary to
make solar panels, batteries, and windmills.
As other nations push forward with this technically
infeasible net-zero policy being discussed on both sides of the
Atlantic, they will suffer the same fate. The joint pressure of
the economic suicide by the U.S.-EU creates an opening for the
CCP to effectively take control of a critical infrastructure
and economic markets and force Western leaders to adopt the
appeasement strategy pursued by Ms. Merkel.
Recent global summits indicate a shared commitment to
freedom of navigation operations in the East and South China
Seas and an acknowledgment toward condemning human rights
abuses. However, the extent of the U.S.-EU work against China
remains limited to mostly agreeable initiatives. In many cases,
I would argue that these summits revealed many divisions
between our Nation and Europe. For evidence, look no further
than the fact that the word ``genocide'' was omitted from the
U.S.-EU joint statement but ``climate change'' was mentioned
about 20 times.
To be clear, it is great to be able to work with our EU
partners on common areas of interest; however, what the CCP
took away from these summits was not a transatlantic commitment
to principles undergirding the rules-based international order.
Instead, the CCP came away with the understanding that the
current administration and EU leaders will sacrifice principle,
prosperity, and security in return for false promises of future
Chinese emissions reductions.
These summits also provided confirmation that there is an
utter lack of cooperation in fighting the CCP's outside
influence in the U.S. and EU capital markets and the economies
at large. There can be zero hope for success in confronting the
threat that the CCP poses without a unified effort on both
sides of the Atlantic, can prevent funneling hundreds of
billions of dollars into CCP coffers for their military
modernization efforts and for continued perpetuation of
genocide against minority populations.
And with that, Mr. Chairman, I request permission to submit
for the record, a Prague Security Studies Institute report.
Mr. Bera. Without objection.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Perry. Thank you. According to this report, the
Frankfort Stock Exchange is currently allowing CCP companies
that engage in intellectual property theft, egregious human
rights abuses, the manufacturing of advanced weapon systems,
and the militarization of illegally claimed islands in the
South China Sea to trade on its exchange. This report indicates
that this single EU stock exchange hosts at least seven CCP
companies through primary listing and at least 68 via the
listing of subsidiary or affiliate.
This is common practice across Europe and unless we hold
serious discussions with our EU partners about the need to deny
malign actors capital market access, there is absolutely no
anti-China strategy that we can come up with that will achieve
our political and security objectives. None, whatsoever.
To combat this critical issue, I will be introducing
legislation next Thursday that utilizes President Biden's EO
14032 to support investment sanctions against PLA affiliates as
well as any CCP company engaging in genocide or other human
rights abuses. This bill is set for introduction and because
this is such a critically important issue in our existential
fight against the CCP, I am actively working to engage with my
partners on the other side of the aisle to join with me in this
bill's introduction. It is critically important that our EU
partners see this as a bipartisan issue here in the United
States.
I will close by asking our panelists one question. Do you
anticipate substantive cooperation between the U.S. and the EU
on combating China's omnipresence in the U.S. and EU capital
markets, and maybe what are the barriers to success if you do
not see us doing that? So that is what I am primarily
interested in is the capital markets, the EU and the United
States working collaboratively to limit China. And I would just
like your opinion on that.
Mr. Bera. And knowing that the gentleman's time has
expired, if the panelists could give short, succinct answers, I
will indulge quick answers. Otherwise, certainly, you can
submit extensive answers in writing.
Ms. Conley. Mr. Chairman, I am happy to very quickly answer
Congressman Perry's question. We are actually developing a
report that looks at the financial grey zone of which Russia
and Chinese malign behavior elicit financing corruption, money
laundering, and misuse of capital markets, is an important part
of their economic warfare. This is not simply just for China,
but also Russia.
And I think what we have seen is the European Union with,
tomorrow, I believe, coming out with a major anti-money
laundering directive. The EU understands it has a problem. It
isn't fast enough in responding to it and, quite frankly, the
U.S. has a strong leadership role to play here. So your point
is taken and I think this is a huge area not just for China,
but also for Russia.
Mr. Bera. If either one of the other witnesses want to
respond, otherwise I will move on to the next witness.
Great. Thank you, Mr. Perry, and your time has expired.
Let me go and recognize the gentlelady from Nevada and my
good friend, Ms. Titus.
Ms. Titus. Thank you very much, Mr. Chairman. It has been a
very interesting and enlightening testimony. I would ask Ms.
Conley though to elaborate on her written statement where she
says there is a greater chance for strategic cooperation of
military assets between the U.S. and EU nations within the
Indo-Pacific. You noted that however that even recently there
has been kind of an aversion of certain types--by certain types
of European countries to upsetting China.
So I wonder if, as we shift our position in the region with
a greater focus on collaboration with Australia, Japan, and
India, if you see any chance that the Quad and NATO could maybe
conduct some joint exercises, maybe similar, but on a larger
scale than the Malabar exercises last year. And if that is not
possible, what about working in cooperation between those two
groups on certain missions that NATO is already engaged in like
counterterrorism, cybersecurity, and ballistic missile defense?
Ms. Conley. Congresswoman, thank you very much for that
question. I think you are absolutely seeing an evolution of
particularly NATO allies separately increasing their force
posture in the Indo-Pacific. Participating more in exercises
and exercises are absolutely critical. I think another element
is NATO is expanding its global partnerships, really
strengthening its relationship, particularly with Japan, with
Australia; we are also seeing bilateral efforts, particularly
the French as well as the British, really strengthening their
military to military relationships with members of the Quad.
I do not believe the European Union in its security and
defense policies will have much of a posture in the Indo-
Pacific. They can, however, again support for coast guard,
illegal and unregulated fishing, maritime issues, this is where
we really need the European Union to strengthen their resolve
on the law of the sea, international maritime norms, and bring
that unity to bear.
I do not believe the EU will really have an expression of a
security posture. It will look much more toward the south, the
Mediterranean, North Africa, Africa, as its most vital security
challenge, but I do think NATO allies can and are playing a
direct role. But again, we need them to concentrate, first and
foremost, of strengthening the collective defense of the Euro-
Atlantic area and then contributing what they can to the Indo-
Pacific region.
Ms. Titus. Well, thank you. Thank you very much.
I would ask you and any of the other members of the panel
if you could just comment on the fact that we know that China
is an adversary. We know we have to compete with them. We do
not want them to necessarily be an enemy, but what are some
areas that we can carve out where we can perhaps work together
with some of our allies in specific policy areas, if it is
climate change or if it is rule of law, whatever?
Ms. Conley, are you going to start?
Ms. Conley. Oh, of course. Thank you. I wanted to make sure
my other panelists had a chance to jump in. Clearly, climate is
probably the area that is right for collaboration, but again we
have to demand transparency. I follow very closely the Arctic
and we have seen, certainly, a significant uptick in Chinese
scientific activities. As a permanent observer to the Arctic
Council, in the Arctic, this, of course, this collaboration is
very welcome. But there has to be transparency of exactly the
kind of science that China is pursuing, that we make sure that
we have confidence that it is science that they are pursuing,
particularly in remote areas.
But the Chinese share with us very clearly that they are
deeply affected by climate change. If they are willing to take
policies and approaches that can reduce the emission of
greenhouse gases, I think we should welcome that and welcome
scientific collaboration. But I think it is very challenging to
see China making meaningful changes to their current economic
model, so I think we have to be very realistic about what we
can expect.
Ms. Titus. Thank you.
Dr. Ferchen, do you want to weigh in on that?
Dr. Ferchen. Yes. I would tend to agree with some of this.
I think there is a lot of emphasis on, in China, these
commitments, verbally, to greening the Belt and Road, for
example, and that means reducing coal-fired power plants along
countries that are a key part of the Belt and Road, for
example, in Pakistan.
The real question is, what is an alternative there, and
this taps into some of Matt Goodman's statements earlier. So
that is a question of financing and technology and that might
be an alternative to what China has on offer, but it also may
be some opportunities for collaboration but it requires
listening to the demands side especially from countries that
are right now taking some of those deals that China has on
offer.
Ms. Titus. Seems an opportunity for us to do some of that
climate financing or at least build it into some of our
development policy.
Dr. Ferchen. Yes, I would agree.
Ms. Titus. I yield back, Mr. Chairman.
Mr. Bera. Thank you, Ms. Titus. Let me recognize the
gentleman from Florida, Mr. Mast.
Mr. Mast. Did you recognize me, Mr. Chairman? I did not
hear you.
Mr. Bera. I am sorry. Yes, I did recognize you, Mr. Mast.
Mr. Mast. All right. That is what I thought. It kind of
broke up for me. And I want to thank our witnesses for their
testimony. I have enjoyed hearing it as well.
I was interested by the line of questioning that my
colleague Ms. Titus asked, and it kind of--my question goes in
a similar front. You see a lot of reliance by our European
allies on China. It is increasing on a daily basis. When you
look at that and you look at China expanding their role
militarily while they still, largely in many cases, do not even
function well as a regional military, they are certainly
expanding the capabilities to function as a global military and
transoceanic military as well.
And my question goes to this. When you look at Article 5 of
NATO that States that an attack on one member of NATO is an
attack on all of its members, what do you all opine, or if you
can all opine, on the views among our European allies about how
strong they consider that Article 5 statute within that today?
Do you think they are viewing that still quite strongly? And
then if you felt like opining on it as well, to even go on to
say as we continue to try to un-bury the origins of COVID-19,
if that were to be a purposeful leak from a lab if you would
consider that an attack on NATO members. And whoever wants to
start on that, it is open.
Ms. Conley. I am happy to begin. I believe, today, the
Article 5 commitment is very solid and very strong and it was
greatly appreciated that President Biden reaffirmed that
commitment. So I think that we can be very assured. I think the
challenge as you noted is that the increased definition and
broadening of risks to transatlantic security, NATO at its most
recent summit enlarged Article 5 issues to space and to cyber.
So we are seeing the security aperture widen.
I couldn't specifically answer if, in fact, the origins of
COVID-19 are attributed and clear and what that would mean for
NATO, but I will tell you that because of U.S. leadership we
have shifted our European allies' views on China and, in fact,
Chinese behavior has actually facilitated that shift. They
acknowledge this issue, but they do not see it in the security
terms that the United States does.
This is what is going to require long, deep conversations,
investment, a lot of encouragement, a lot of tough love, a lot
of pushing European allies in uncomfortable places they do not
want to be in the middle of the contest between the United
States and China. But they aren't on the sidelines. They are
part of the Western community of democracies and we need their
support in a whole of allied effort against China.
Mr. Mast. Appreciate your response. Let me see if any of
the rest of our panel has anything to offer on that. Thank you
for your thoughtful response.
Mr. Rough. Sure. I will jump in and say that virtually any
European diplomat or leader when he speaks to a high-ranking
official, you hear a pretty strong commitment within NATO to
Article 5. At the same time, however public opinion within
Europe, it is rather varied, and I would say that a Latvian or
a Lithuanian looks at the threat of Russia very different than
a Portuguese or Spanish citizen who maybe looks more toward the
Mediterranean and the global south.
So while there is a very strong leadership support for
NATO, polling in the U.S., I think, is a little bit more robust
when it comes to our views of Russia and NATO.
As for the COVID question, I would say that we are unlikely
to ever get clarity on that, I think. That is my speculation.
And so I am not sure we will be able to reach a threshold on
origins of COVID to where you would be able to have a real,
kind of strong, kind of European consensus on that issue.
Mr. Mast. That is a good point.
Mr. Rough. Well, I think that is just probably the nature
of this sort of issue at least how the Europeans see it. And
then one shouldn't forget that NATO has geographic boundaries
under our Article 6 of the founding treaty, north of the Tropic
of Cancer. And so at least some of the zones of dispute where
China is really pushing out aggressively, say, the South China
Sea and elsewhere, do not follow very specifically within the
NATO remit.
A question though, and perhaps this is also somewhat of a
punt, is how the Europeans would react, because I think
American expectations would be there in the event of some sort
of military emergency in the Asia Pacific. They are treaty
allies of ours, they are not neutral as Heather Conley said,
and yet that really is a part of the NATO zone.
Mr. Mast. Well, we have 5 seconds, if Mr. Ferchen wants to
chime in.
Dr. Ferchen. Just that I think we need, just need to be
careful to put too much hope in the idea that sort of a focus
on China will sort of save NATO. I think Russia is going to be
a greater focus especially for most in Europe, and I think the
same can be said for the broader transatlantic relationship.
For all the cooperation that there can and should be on China
issues, I think that relationship has to be solid on its own
terms.
Mr. Mast. Thank you, all.
Mr. Bera. Great. Thank you, Mr. Mast.
And let me now recognize my good friend from the State of
North Carolina, Ms. Manning.
Ms. Manning. Thank you, Mr. Chair. I want to thank both of
our subcommittee chairs and all the witnesses for such an
interesting hearing.
I want to focus on one specific industry that has been
particularly problematic during this pandemic and that is
semiconductors. My question was going to be for Mr. Goodman,
but I will welcome an answer from any of you who would like to
speak on this. Given the importance of semiconductor chips, the
Biden Administration is working to increase the resiliency of
U.S. semiconductor supply chains and has reached agreement with
key allies to cooperate on a broader semiconductor strategy.
Can you tell us about what kinds of cooperation are already
underway between the U.S. and Europe on the supply chain
security and how these initiatives can be further enhanced?
Ms. Conley, you look like you are ready to answer.
Ms. Conley. I just have an eager face, I think. Thank you.
Unfortunately, Matt Goodman had to leave early, but absolutely.
I mean, I think this is where, certainly, some legislation in
Congress thinking about a trusted ally approach that we look to
our allies as important additives to the supply chain. So the
Dutch, in particular, with important semiconductor facilities,
that we work with our allies and partners in Asia as well to
buildup resilience, provide those alternatives, so I think some
of that good work is underway.
I apologize for not knowing the specifics of that but that
is the type of allied approach. It is not so much that it is
against China, it is strengthening the West, strengthening our
ability to produce and be autonomous and not rely on any one
supplier.
Ms. Manning. So the acquisition of the United Kingdom's
largest semiconductor chip fabbed by a Chinese-backed company
has prompted review for national security concerns and has
there been a broader trend of PRC-backed companies acquiring
semiconductor companies throughout Europe and, of course, if
so, what are the implications we should be worrying about?
Ms. Conley. Well, certainly, there is an uptick in Chinese
technology acquisition. In fact, my colleague Jim Lewis and I
just completed a study last fall that looked at Chinese
technology acquisition patterns, actually, in the Nordic
States. We did not examine the United Kingdom in that study
some of it is more difficult to detect. Some of it is coming
through shell companies. There is certainly lack of clarity of
origin and source of companies. I think that is part of making
sure we have strong intelligence in understanding who exactly
is behind these acquisitions.
But as you noted, the United Kingdom, certainly, over the
last year and a half, has done a 180 on its policy toward
China. It has extensively reviewed a lot of Chinese investment
including the nuclear power plants and elsewhere. The
sensitivity is much higher in Europe and that is to be
commended. The challenge is we have to create those
alternatives. Could U.S. investment be that alternative? This
is what I mean about turning to allies to seek that alternative
investment rather than China.
Ms. Manning. Thank you.
Someone else want to jump in?
Mr. Rough. Sure. If I could just buildupon that, I think
one of the real challenges is these opaque funding mechanisms
and vehicles and ambiguous partnerships that have been stood
up. Heather mentioned grey zones of finance and responding to
the issue of capital markets and that is certainly something
that is making it more and more difficult for our European
allies, even if the will is there, to identify who the end user
or end investor is.
It is part of the reason why I think it is important for
the Administration to share CFIUS best practices. Of course,
Congress passed important legislation in 2018 to expand its
jurisdiction. We need more best practices in Europe and then
also more intelligence sharing and widening the information
flow to Europe on who exactly is acting and in what capacity.
As an example of what I think is a path forward, Europe
seems to be going the way, and I mentioned earlier to
Congressman Chabot, the way of industrial policy. Something
like half of its 137 critical products in the supply chains
have some reliance on China and so they are forging out and
pushing out into industrial policy.
I am not sure that picking winners and losers like this is
going to be the most impressive or effective way forward. I
would rather see us really invest in basic research and
development. I would like to see us push for collaboration
across industries and across the Atlantic. We have done this in
the past successfully.
The Dutch company that Heather mentioned, ASML Holdings, is
crucial to the semiconductor supply chain, and in the early
1980's it was really researchers in the U.S., Japan, and Europe
that began working together in a consortium that included Intel
and two other American chip makers as well as the Department of
Energy labs. All of that is an effective way forward and a way
of providing that alternative along with the investment
screening that is absolutely essential.
Ms. Manning. Great. Thank you.
Mr. Ferchen, a quick question for you. You said earlier in
your comments that the major EU countries are reevaluating the
impact of China, the need to balance economic needs with
security concerns and geopolitical concerns, and you mentioned
that any effort to frame this new strategic cooperation as
anti-China will receive a frosty reception in the EU. So can
you elaborate on that a little bit?
Dr. Ferchen. I think it is hard enough for the EU, as the
EU, to come together on any specific China policies. I think
you will see that, for example, investment screening policies
or the EU-Asia Connectivity Strategy, which are both nominally
about China, do not really say much about China. So it is very
difficult to get consensus at the EU level on anything related
to China especially if it is a strong pushback.
There are just so many different views within the EU, so
many different structural relationships economically and
otherwise that it is very difficult for the EU to come to an
agreement that any kind of policy is going to be focused on
China, especially if it is in some sense antagonistic toward
China. That isn't that they won't adopt certain policies and
some that are very much in line with U.S. interests, it is that
the framing as overtly against China or adversarial toward
China will just not fly.
Ms. Manning. Thank you, and I yield back.
Mr. Bera. Great. Thank you. Let me recognize my good friend
from California, Congresswoman Young Kim.
Ms. Kim of California. Thank you, Chairman Bera and Ranking
Member Chabot. I want to thank all of our witnesses for joining
us today and for your patience for staying with us this late.
You know, over the past year, we have seen a rising level
of concern globally regarding the security of Taiwan. Potential
conflict over Taiwan was included in the final documents of the
G7, NATO, and the U.S.-EU summits, signaling increased
transatlantic concern about the threats to peace and stability
in the Taiwan Strait.
So, Mr. Rough, let me pose this question to you and I want
to followup on this with a question on where Europe stands on
Taiwan's inclusion in international organizations. We have seen
Taiwan repeatedly muscled out of observer status at many
international organizations including WHO. Earlier this year, I
introduced legislation that would direct our State Department
to push for Taiwan's inclusion at the WHO as an observer which
has garnered a widespread bipartisan support with over 120 co-
sponsors to date.
But we recognize that we will need strong buy-in from our
European partners as well, so where does Europe stand on this
issue?
Mr. Rough. Thank you very much for that question. I would
just start by saying that partnering with the Europeans in
international organizations is going to be in central to check
what China's worst practices when it comes to intellectual
property, all the way to the activities at the World Health
Organization. We have seen, I think, a pattern of behavior from
Beijing on, say, 5G technologies where quite a bit has become
public about how much pressure is being put on European
governments not to kick Huawei out of its networks, for
example.
Taiwan, near and dear to the heart and soul of the CCP in
Beijing, is the 5G issue but on steroids. And so the pressure
that is being put to bear that one hears about anecdotally on
European governments and on European leaders not to raise the
Taiwan issue that it will have repercussions in market access
to China is very high.
And so I think while there is increased recognition after
the crackdown on Hong Kong, the genocide designation that
Europe joined in on Xinjiang all the way to complete denial of
international law in the South China Sea, or over the Sino-
British 1984 declaration on Hong Kong, there is recognition
that the Taiwanese especially to the COVID pandemic have a lot
to offer and are a beacon of democracy and a contrast. But
there are hesitations there and, to date, the Europeans have
only been willing to go so far.
Ms. Manning. Well, thank you for that. The next question is
where the recent NATO summits final communique laid out the
threat the CCP poses to the security of the alliance in the
strongest terms to date, both German Chancellor Merkel and
French President Macron downplayed that issue. Moreover, other
NATO allies remain more focused on the threat posed by Russia.
Mr. Rough, what does the Biden Administration need to do to
ensure the alliance takes concrete actions to address the
threat posed by the CCP rather than just admire the problem? In
particular, how can the Biden Administration rally the NATO
allies who do not see the PRC as a pressing concern and
convince them that we cannot protect our collective security
without confronting the PRC?
Mr. Rough. Well, for starters, the European strategy that
was adopted and has been much discussed today of labeling China
a partner, a competitor, and a rival. Secretary Blinken picked
that up in his testimony, his hearing before the Senate Foreign
Relations Committee when he was nominated to become Secretary
of State. And for us Americans, we might think of it as we just
did in the previous colloquy as issue sets, so there is
partnerships, there is areas of competition, and there is area
of rivalry.
But, really, part of the reason why I think the European
Union fits the strategy so well is it allows each country to
pick whatever designation they want and take it as their own.
So Chancellor Merkel has never used the word ``rival'' to
describe China. The French were not pleased at the inclusion of
Taiwan in the NATO communique. I think that is an open secret
at this point.
And so there are different attitudes from, say, the Czech
Republic all the way to Germany on Taiwan and that variation is
there in Europe. What the Biden Administration can do is, I
think, first of all, ensure that as the U.S. gets tougher on
China that Europe is not an open window. So if we lock the
door, but the Europeans on investment screening; on export
controls, also an area we just spoke about; semiconductors
where the U.S. has leaned on the Dutch Government to make sure
that ASML does not export semiconductors; key materials to
mainland China that helped us win the 5G battle, we have to
make sure that we are robust at home on that and then we have
to work together, I think, to forge the economic future to make
sure there are alternatives.
If Germany does feel like it is under pressure because
Volkswagen in the first quarter of this year sales in China
rose more than 60 percent, well, we want to make sure that over
time there are new markets, there are alternatives, and that a
free and open environment aligned on China can serve as an
alternative to make it less painful. So I would urge us to move
in those directions.
Ms. Kim of California. Thank you. I could go on but I know
my time is up, so I yield back. Thank you.
Mr. Bera. Thank you. Let me go and recognize my friend from
the great State of Pennsylvania, Ms. Houlahan.
Ms. Houlahan. Thank you, Mr. Chair. Can you all hear me OK?
Mr. Bera. Whoops. We cannot hear you.
Ms. Houlahan. You cannot hear me?
Mr. Bera. Do you want to sit closer to the mic?
Ms. Houlahan. Can you hear me?
Mr. Bera. It is very low. Sorry.
Ms. Houlahan. Why do not you pass and I will 5:03:24 in 5
minutes. I will pass right now.
Mr. Bera. Great.
Ms. Houlahan is our last member. Theresa, do we have any
other members on?
Ms. Lou. Chair Bera, no. At this time, Rep Houlahan is our
last member.
Mr. Bera. Okay. And, Chrissy, do you want to give it one
more go at it?
Ms. Houlahan. Yes. Is it working now or not?
Mr. Bera. Theresa, can raise her volume or, can the
witnesses, can you guys hear Ms. Houlahan?
Mr. Rough. It is quiet, but I can make it out, I think.
Mr. Bera. Let's try to make it happen.
Ms. Houlahan. Okay.
Mr. Bera. Chrissy, the floor is yours.
Ms. Houlahan. Thank you. My first question has to do with
rare earth elements and China accounts for 95 percent of that
global
[inaudible]. Rare earth elements which are, of course,
essential to the
[inaudible]. A 2020 report says that the EU identifies
[inaudible] rare earth elements. My question is to all of
you all. How can the United States and Europe work better
together to reduce our dependency on
[inaudible] monopoly on rare earth elements, both
refinement and processing, and which key partners could we be
engaging both
[inaudible] in the effort?
Mr. Bera. I think the question was about rare earth
elements in China.
Ms. Houlahan. Yes.
Ms. Conley. Well, I am happy to just take a quick stab, and
I think this is where understanding market dominance in
particular, and I again focus on the Arctic region, and
understanding where Chinese mining interests were very focused
on Greenland and the rare earth minerals that are presented
there.
I think this was a wake-up call for the United States and
now the United States is working with the Kingdom of Denmark to
increase its investment opportunities and economic
opportunities in Greenland. At the same time, the new
Greenlandic Government has pushed back against some of the
Chinese mining interests and seeking a different, more
ecologically friendly, economic approach.
So we see where we are waking up to understanding where
these important minerals are and making sure there is diversity
of supply which requires the U.S. to engage, and at the same
time I think responsible home rule governments as well as
governmental authorities understand the costs of this type of
Chinese development. So I think there is some good news there,
but we have to remain vigilant and focused.
Dr. Ferchen. The only thing I would add to this is that I
think the cost, environmental, social, and human cost for China
to have this dominance is high and there is a recognition of
that. And I think one of the worries is that as China seeks
other markets to develop rare earths then those environment,
social, and human costs will basically be exported. And I think
this is a challenge for both the U.S. and Europe to potentially
understand that especially in areas like Greenland.
Ms. Houlahan. Thank you. And with what is left of my time,
I would like to change to intellectual property and how the
United States and EU can work together to help provide better
[inaudible] by China or
[inaudible].
Mr. Bera. I am not sure if I caught the full question, but_
I think it was about investments and properties in the United
States?
Ms. Conley. Or was it IPR?
Mr. Bera. Or maybe it was--yes. Okay.
Ms. Houlahan. Intellectual property.
Mr. Bera. Intellectual property.
Ms. Houlahan. Yes.
Ms. Conley. Again, I am just happy to begin and then turn
to my fellow panelists. Again, I think Europe has had a great
wake-up call to Chinese IPR theft. Theft, both through
espionage but also just through straight acquisition. And I
think this is where the German Government was very, very aware,
which I believe it was in 2018 if I have my year correctly, of
the Chinese potential investment into the German company KUKA,
which is their high-end robotics.
They understood that Germany's innovative and economic
strength was being both was purchased and they also saw a lot
of Chinese investment in German universities and research and
development. That is, of course, across many excellent European
universities and their R&D centers.
So again acknowledgment of the problem, pushing back--that
investment screening toolkit that the EU and member States are
working on with different degrees of focus. A lot of this is
intelligence. A lot of this is transparency of who the
purchaser is. But Europe has awoken to this. They are pushing
back and, certainly, the Germans and the British are much more
cognizant of this, but we still have a ways to go.
Ms. Houlahan. Thank you. I yield back the balance of my
time and thanks for putting up with me.
Mr. Bera. Well, great. Thank you.
Oh, go ahead.
Mr. Rough. I would just add, in my view, I mean this is a
great example of where we can show the Europeans that the
choice between the United States and China, if we do not want
to frame it that way for a variety of reasons, is nonetheless
real because the Chinese have perfected this model of acquiring
stakes in companies. China's State-owned automaker owns 10
percent of Daimler, for example. The Chinese invited major
Japanese and French actors into joint ventures in high-speed
rail. They acquired the technologies, licitly or illicitly, and
now both are cut out of the market. One can imagine where
automobiles are heading.
The same also, I would add, on commercial aviation
industries. These are the most competitive parts of the
European economy where Beijing is, for example, purchasing an
American French jet engine for their principal new commercial
aviation prototype, and then, presumably, extracting a lot of
the IP and a lot of the technology and then cutting us and
others out of the market.
So this is a pattern that we have seen on the Chinese side.
And I think as the Europeans see that it isn't really a choice
between the U.S. and China, but a choice between having a
competitive economy of the future that is allowed to compete in
a free and open world or, really, one that is kind of a Sino
hierarchy of vassals with the Europeans underneath those
Chinese companies, I think, as that choice becomes increasingly
clear, they will be more and more prone to align with us on a
variety of issues.
Mr. Bera. Great. Thank you for that.
And, Theresa, any additional members?
Ms. Lou. No, sir. Not at this time.
Mr. Bera. Okay, seeing none, I will go and make a closing
statement. Seeing the ranking member Mr. Chabot on, certainly,
we will give him an opportunity.
Obviously, the fact that members came back after votes to
ask questions suggests that this topic is one of great interest
and real strategic importance for countries that share similar
values of rule of law, of intellectual property rights, the
free markets, maritime security, freedom of navigation, a
respect of traditional international rules, human rights, et
cetera, and these are all places where the United States and
Europe should come together.
And China will try to say this is about an anti-China
strategy and the United States is trying to be hegemonic here,
et cetera, but it is not. It is about what kind of a future do
we want in the 21st century and fair competition based on a set
of rules and norms is fine. Yes, I do not think we fear the
competition of Chinese companies or China's ideas. I do not
think Europe fears that. But this is about the values that
bring us together in the transatlantic and, increasingly with
our allies in Asia, in Japan and Australia and New Zealand,
Korea young budding democracies in the ASEAN nations, India as
a mature democracy.
So I look forward to working together with the ranking
member Mr. Chabot on these issues and, certainly, with our
colleagues on the Europe Subcommittee, if not other
subcommittees. We have to get this right and it cannot be a
Democratic or Republican strategy, it has got to be an American
strategy. Similar to how we worked together in the post-World
War II era during the cold war, again on values of principle
and ideas. And I think that is how we have to approach this.
And yes, we did not even get into the Arctic Council, we
touched on it, China sits here and says--the South China Sea is
theirs. I just do not--how they claim territorial rights in the
Arctic, and I also do not think they have those rights in the
South China Sea either.
So thank you to the panelists. I think this was a great
panel. And with that let me turn it over to the ranking member
Mr. Chabot for any closing statements he might have.
Mr. Chabot. Thank you, Mr. Chairman. And I would just say
ditto to the comments that you make. In order to be successful
in our--to us it probably is more countering the PRC than it is
our allies in Europe, but in order to be successful in our
effort to have our principles prevail rather than their
principles, which is authoritarianism and not rule of law and
not human rights and on and on, we are going to need to work
together.
So we need to make sure that our allies in Europe are
willing to work with us and I think that is certainly possible.
But many of us really question their willingness to do some of
the things which are going to be necessary for us to be
successful in this. They have to and the previous
administration talked about this a fair amount that they have
been able to be free riders, essentially, in a lot of this and
not, I know it is mentioned that well, a third of them are now
up to their 2 percent, but that means two-thirds of them are
not.
So they have a long way to go and yes, I hope we can work
together, but I hope it is not lip service that we are
receiving from our allies in the future. That it is a real
willingness to do some of the heavy lifting that is going to be
necessary if the principles that we all believe in are going to
prevail in this long-term, for lack of a better term, let's say
rivalry that we have. And that is probably as nice a word as
you can put on it.
But thank you for holding this hearing. I think the
witnesses were excellent, and I will yield back.
Mr. Bera. Okay. Thank you to the ranking member. And,
really, again want to reiterate my thanks to the witnesses,
certainly, for holding on there as we had votes interrupt our
hearing and for being willing to come back and finish out the
hearing. And with that the meeting and hearing is now
adjourned. Virtual gavel coming down. Thank you, everyone.
Mr. Chabot. Thank you.
[Whereupon, at 5:15 p.m., the subcommittees were
adjourned.]
APPENDIX
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STATEMENT FOR THE RECORD
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