US House panels consider how to counter China security threats and 'unfair' trade practices

The US House of Representatives held hearings on Wednesday on several proposals concerning trade with China, including possible restrictions that could limit Chinese electric vehicles on US streets, block Chinese semiconductors and components from the US market and impose fees on Chinese-made ships looking to dock in US ports.

On a day with multiple House hearings, federal officials and members of Congress repeatedly raised the need to address the national security risks and unfair trade practices posed by China's technology sectors.

Commerce Secretary Gina Raimondo told a House subcommittee that her department intends to roll out regulations on Chinese electric vehicles concerning data collection and privacy issues by the end of this year.

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"Let's say we had a million Chinese cars on the road, all connected, all collecting data from Americans - all of that is going back to Beijing," she told the subcommittee on innovation, data and commerce.

"So we are being very aggressive," Raimondo said.

The rules the department is drafting, she said, could cover "everything from banning Chinese EVs on the roads in America, to regulations on their software - maybe all the data has to be housed in America".

Raimondo added that her concerns lay in "the national security issue of all this data making its way back to the Chinese military".

"We are being very aggressive" considering new restrictions on Chinese-made EVs, US Commerce Secretary Gina Raimondo said. Photo: AP alt="We are being very aggressive" considering new restrictions on Chinese-made EVs, US Commerce Secretary Gina Raimondo said. Photo: AP>

She also said the department was reviewing public comments on the security risks of connected vehicles, to understand the ability of cars to communicate with external systems, potentially including the capture of data or the remote capacity to disable or manipulate other vehicles.

Raimondo said that the department's budget provides resources to strengthen the US relationship with allies to "shape the strategic environment in which we operate vis-a-vis China".

At another hearing, this one by the House select committee on China, lawmakers heard proposals from American experts on tackling Chinese dominance in semiconductors, shipbuilding and drones.

Representative Raja Krishnamoorthi of Illinois, the committee's senior Democrat, argued that failing to address such challenges could "invite aggression".

Krishnamoorthi advocated reinstating an import surge protection mechanism established when Beijing joined the World Trade Organization in 2001.

"It's time to revive and modernise section 421," he said, a rule created to enable the US to impose short-term tariffs to mitigate market disruptions caused by sudden increases in imports from China's cheap manufacturing sector. The section expired in 2013.

US Representative Raja Krishnamoorthi, an Illinois Democrat, has been a vocal critic of China's policies. Photo: Reuters alt=US Representative Raja Krishnamoorthi, an Illinois Democrat, has been a vocal critic of China's policies. Photo: Reuters>

Krishnamoorthi accused China of denying US companies access to its market while flooding the US with heavily subsidised goods.

He noted that DJI, a Chinese drone maker that is a global leader in the industry, accounted for 90 per cent of the US consumer market while Skydio, a manufacturer based in San Mateo, California, had to pull out last year of the US market due to DJI's lower prices.

A Skydio drone selling for US$1,000 was up against a comparable DJI drone that costs US$300, Khrishnamoorti said, contending that DJI was subsidised by the Chinese government.

The select committee and its witnesses seemed to agree that the Chinese Communist Party intends to control technologies and sectors that will determine future conflicts; They also said that China had about 235 times more shipbuilding capacity that the US, and that it was heavily investing in older-generation semiconductors.

Representative Ro Khanna, a California Democrat whose district includes much of Silicon Valley, said he supported the demands labour unions had made that the US impose dock fees on Chinese-made ships, contending that the sector was heavily subsidised by Beijing.

In April, the United States Trade Representative opened an investigation into China's maritime, shipbuilding and logistics sector for "unfair and non-market practices".

Docking fees of about US$1 million per cargo freighter, Khanna said, "would be less than US$50 per container, which would mean that Americans may have to pay a few cents more for their jeans or shirts so that we can have American-made ships again".

Khanna criticised the US Chamber of Commerce, a leading business lobby, for opposing the move.

"They testified 'No, we can't pay a few cents more' ... This is the philosophy that bankrupted and deindustrialised America for cheap labour for cheap prices," Khanna said.

"We kept sending our industry overseas to China and we're still doing it."

Representative Andy Barr, Republican of Kentucky, said he supported a dock fee "because I think China is an exceptional case", but acknowledged that was effectively a "protectionist policy" that "could evolve into something beyond China".

"I do not believe that we should try to counter China by imitating Chinese industrial policy," Barr said.

Christopher Miller, author of Chip War: The Fight for the World's Most Critical Technology, told the committee that while US President Joe Biden's administration had enacted some safeguarding measures "there is more work to be done", especially for semiconductors that operate both drones and ships.

Miller, a professor at Tufts University's Fletcher School of Law and Diplomacy, claimed that in recent years, Beijing had poured billions of dollars of subsidies into lower-tech "foundational chips", used in everything from cars to laptops.

"If you project current trends forward, China is poised to see its share of the foundational chip market increased dramatically," he said.

"Some of these chips will be sold into Chinese markets, but many will be sold into Western markets unless policy changes," he said, calling for new outbound investment restrictions on lower-end chips.

Biden issued an executive order last year that restricts outbound US investment in advanced technologies like hi-tech chips, AI and quantum.

"Investment flows into China's chip industry have declined substantially and the new outbound investment restrictions will put further limitations on any investment into the Chinese chips," Miller said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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