House China Committee Issues Wish List

Following a year of hearings and demands for reams of disclosure from government and industry, the House Select Committee on China released its work product for 2023.  

The 53 page report enumerated recommendations to address Beijing's human rights violations and military modernization, focusing on halting the genocide of the Uyghur population and curtailing profits from forced Uyghur labor. Additionally, it aims to build a more credible deterrent in the Taiwan Strait. 

The report presents findings and recommendations, outlining a strategy to compete with the PRC in economic and technological spheres. The strategy is based on three pillars.  

1. Resetting the U.S.-PRC Economic Relationship:

   • Key Finding: The PRC's economic system is not compatible with WTO standards, undermining U.S. economic security. The strategy involves revisiting the PRC's trade status and advocating for annual renewal of trade relations.
   • Recommendations include countering the PRC's economic strategies, increasing transparency in U.S. investments in the PRC, preparing for economic impacts of potential conflicts, and protecting U.S. markets from PRC products that distort the market.
   • “It is time for likeminded countries to come together and seriously examine how to collectively counter the PRC’s approach to economics and the harm it is doing to the global trading system," the report authors write.  "If this cannot be achieved within the confines of the WTO, then a new multilateral effort by likeminded market economies that goes back to first principles is needed"

2. Stemming the Flow of U.S. Technology and Capital to the PRC:

   • Key Finding: American investors wittingly and unwittingly support the PRC's defense industry and human rights abuses.
   • Recommendations focus on restricting investments in entities associated with the PLA, critical technology sectors, or forced labor.
   • Strengthening export controls to restrict critical technology transfer to the PRC and modernizing export controls to adapt to rapid technological changes and the PRC’s Military-Civil Fusion strategy are also suggested.   

3. Investing in U.S. Technological Leadership and Economic Resilience:

   • Key Findings and Recommendations involve investing in American innovation, executing a talent strategy for R&D in critical technologies, developing a positive economic agenda with allies, increasing transparency in U.S. dependency on critical minerals from the PRC, reducing dependency on the PRC for pharmaceutical supply chains, and expanding tools to counter the Belt and Road Initiative through strategic investments and reforms.

Export Control Specifics

To enhance national security, Congress is advised to implement the following measures:

1. Allocate Additional Resources to the BIS:

   • Enhance the Bureau of Industry and Security (BIS) within the Commerce Department with increased personnel, technology, data management, and intelligence support.
   • Implement necessary reforms, such as updating the End User Review Committee's process, closing the "subsidiary loophole," and expanding BIS's authority over dual-use open-source technology.

2. Implement Country-Wide Controls:

   • Adopt "country-wide" controls similar to those applied to advanced semiconductors on October 7, 2022.
   • Require the Department of Commerce to establish these controls for specific technologies sent to foreign adversaries, enforcing a "policy of denial" for export licenses on items under "National Security" controls.

3. Establish Comprehensive Controls on Critical Technologies:

   • Mandate quick establishment of general controls on critical and emerging technologies exported to foreign adversaries, including AI, quantum technologies, biotechnology, advanced materials, optics, energy research, and space-based technologies.

4. Expand Export License Requirements:

   • Broaden export license requirements to include subsidiaries of foreign adversaries on the Entity List to prevent technology diversion.

5. Conduct Comprehensive EAR-99 Review:

   • Instruct the ERC to thoroughly review all commercial items (EAR-99) for potential export control applicability.
   • Authorize the Departments of Defense, State, and Energy to nominate EAR-99 items for control based on national security or foreign policy reasons.

6. Establish Cloud Computing End-Use Rule:

   • Direct the Department of Commerce to set a rule for cloud computing end-uses, limiting U.S. technology in advanced cloud computing clusters for foreign adversaries.
   • Implement "know-your-customer" requirements for U.S. cloud computing firms and mandate reporting to the Commerce Department on significant computational resource rentals by foreign adversary companies.

7. Implement Policy of Denial for PRC Firms:

   • Enforce a "policy of denial" for all U.S. technology exports to PRC firms involved in espionage, including Huawei and ZTE, and revoke existing licenses.
   • Prohibit export control licenses for products and technologies related to supercomputing for specific PRC entities.

8. Negotiate Expanded Multilateral Controls:

   • Instruct the Department of State, alongside the Multilateral Action on Sensitive Technologies group and the Department of Commerce, to negotiate expanded controls with democratic partners on key technologies.
   • Collaborate with NIST and the Department of Energy to set international standards in artificial intelligence.

9. Establish a New Plurilateral Export Control Regime:

   • Direct the Department of State to create a new export control regime, modeled after COCOM, including like-minded partners and allies.
   • Focus this regime on preventing PRC and other foreign adversaries' access to critical and dual-use emerging technologies.
   • Provide incentives and resources for countries to participate in this new export control framework.