How Congress wants to counter China’s growing economic clout
The House select committee held a hearing Wednesday on economic competition with China.
“This was fun,” former U.S. trade representative Robert Lighthizer said near the end of Wednesday evening’s House hearing on economic competition with China. While his assessment is debatable (several of the committee’s members have young children, and the hearing ran well into the evening), Democrats and Republicans agreed that in the decades to come, the role of the United States as a global superpower will be tested by how it handles China’s economic and geopolitical ascent.
Some lawmakers have cautioned that while it is necessary to meet the challenge from East Asia, competition with China must be kept from devolving into xenophobia or nationalism.
Members of the select committee have said that their target is Chinese leadership, not Chinese people, but that distinction can arguably get lost in the heated anti-Beijing rhetoric.
President Biden has said he seeks competition, not confrontation, with China; Wednesday’s proceedings gave that competition an existential cast. “We need to stop fueling our own destruction,” said Rep. Mike Gallagher, R-Wis., the select committee’s chairman.
Three highlights from the hearing, below.
'I want them to choose the U.S.'
“The top people have choices. I want them to choose the U.S.,” said former Google CEO Eric Schmidt, the highest profile of Wednesday’s witnesses. He was the second Silicon Valley leader to testify on Capitol Hill this week, after OpenAI founder Sam Altman appeared before a Senate panel on Tuesday.
Like Altman, Schmidt is now deeply involved in the torrid race to develop and deploy generative artificial intelligence.
So, of course, is China.
Schmidt argued that to keep pace with China in AI and other critical fields — he enumerated several, including quantum computing, biology and energy — the United States needs to attract more high-skilled immigrants, including Chinese students trained at top American universities (now, most of them return home).
"Let's start with our best friends and invite them to the party and keep them at the party,” Schmidt said. Those invitations come in the form of H-1B visas, which are distributed through a lottery.
Because so many workers in high technology come from abroad, H-1B visas function as a kind of lifeblood for Silicon Valley, which has long advocated for reforms in what can be an onerous and unpredictable process.
A new bill introduced by Sens. Chuck Grassley, R-Iowa, and Dick Durbin, D-Ill., would eliminate some loopholes in the H-1B process while giving priority to highly skilled applicants.
Read more from our partners: Biden's new export curbs place many Chinese Americans at risk of losing their jobs or their citizenships.
The intricacies of shipping policy may seem like an obscure point in a rivalry between two nuclear superpowers, but the debate over a tariff exemption for imports known as “de minimis” almost perfectly encapsulates how deeply the Chinese and American economies are intertwined.
“Two million packages a day — almost all from China,” Lighthizer said. “We have no idea what’s in them.”
Like other China hawks, Lighthizer is a proponent of annulling the de minimis rule, which exempts imports valued under $800 from duties. Effectively, the rule hugely benefits Chinese e-commerce companies that ship online orders directly to American consumers.
As top U.S. Customs and Border Protection deputy John Leonard quipped last year, “China has a free trade deal with the U.S.: it's called de minimis." One estimate suggests the exemption cost the United States $188 billion in lost revenue from shipments originating in China last year.
The previous de minimis limit was $200, but Congress raised the exemption to $800 in 2016. Now, some experts and lawmakers think the de minimis threshold should be brought down again or otherwise amended to deprive Chinese retailers of a sizable competitive advantage.
Proponents of such a move note that China’s own de minimis threshold is much lower than that of the United States: $8.
Read more from our partners: Shein and Temu the latest China tech targets in Congress body's sights.
"These are dangled in front of our Wall Street friends, and they're buying into it every time,” said committee witness and China expert Roger Robinson, who supports economic “decoupling,” in particular when it comes to American private investment in Chinese companies.
The United States now sends some $118 billion in what is called foreign direct investment to China each year. And since the companies reaping that investment are very possibly state owned (as the biggest and most prominent companies in China tend to be), those funds ultimately redound to the benefit of Beijing’s Communist rulers.
In effect, American investors are funding China’s economic rise, Robinson argued on Wednesday night.
“This sounds difficult to believe, but it is an empirical fact: the majority of American investors are unwittingly funding Chinese concentration camps, weapons systems for the People’s Liberation Army (PLA), and more,” he has previously written.
The White House shares Robinson’s concern and is working on rules, to be issued soon, that would prevent American entities from funding China’s high-technology ventures.
Read more from our partners: Proposed China investment curb by U.S. sparks debate among chipmakers.
Cover Thumbnail Photo: Jade Gao/AFP via Getty Images