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Senate Debates Tactics to Make America More Competitive with China

December 17, 2020 by Tom Ramstack
China's President Xi Jinping (top center) attends the second plenary session of the National Peoples Congress (NPC) at the Great Hall of the People in Beijing on May 25, 2020. (Photo by NOEL CELIS/AFP via Getty Images/TNS)

WASHINGTON — The U.S. Senate continued a hardline crackdown on China Wednesday during a hearing on how to ratchet up American economic competitiveness.

Economic advisors repeated warnings that the U.S. government needs to create more incentives for domestic industries that are lagging behind Chinese competitors.

Otherwise, U.S. failures to protect intellectual property and to invest in infrastructure could mean China gains dominance while the yuan replaces the dollar as the world’s preeminent currency, according to advocates for American enterprise.

“The United States is drifting and China is watching,” said Melanie M. Hart, a China policy director for the Center for American Progress, a public policy foundation.

Recently the Chinese government announced a long-term plan for economic development that sets an aggressive agenda for research and development, infrastructure and other investment. One of the areas of investment is 5G, which refers to the fifth generation technology for broadband cellular networks that telecommunications companies started installing last year.

“The new plan suggests that China is doubling down,” Hart told the Senate Banking, Housing and Urban Affairs subcommittee on economic policy.

However, “We did not upgrade our strategy and the U.S. has lost its edge,” she said.

The Senate hearing coincides with tough legislation on China awaiting the president’s signature, resentment over the deadly coronavirus pandemic that started in Wuhan and a pending bill to make U.S. businesses more competitive.

“The big question now is whether we fight or surrender,” said Sen. Tom Cotton, R-Ark., who chairs the subcommittee on economic policy.

The pandemic exposed the extent to which the United States depends on China for crucial products, such as personal protective equipment and medicines, Cotton said.

He also complained about American companies, such as computer giant Apple Inc., who he described as “kowtowing” to Chinese government policy in ways not required by Chinese companies operating in the United States.

Similar resentments propelled Congress this month to approve a bill that would expel foreign companies from U.S. stock markets if they fail to comply with federal auditing regulations, including a certification that they are not under the control of a foreign government.

Although the bill does not single out China, the wording left little doubt it is the main target.

The congressional sponsors said they want to weed out companies that operate as alter egos of the Chinese government, along with its staunch secrecy. 

One of them is telecommunications giant Huawei, which is one of the world’s biggest 5G equipment manufacturers.

Last week, the Federal Communications Commission rejected Huawei’s request to reconsider the U.S. government’s designation of the company as a national security threat.

The designation bans American telecom companies from using subsidies from the FCC to promote universal access to telecommunications services. It also shuts Huawei out of most of the U.S. market.

“Huawei has a long and well-documented history of close ties to the Chinese military and intelligence communities, as well as the Chinese Communist Party, at every level of the company all the way up to its founder,” FCC Chairman Ajit Pai said in a statement two weeks ago.

Another get-tough measure is the America Leads Act, which is pending in the Senate and House. Republicans and Democrats are giving early signs they both support its provisions for significant investments to contend with China.

The proposal would allocate more than $350 billion to synchronize efforts of American industries to compete with Chinese companies. It also seeks to develop an “Indo-Pacific strategy” to join with allied countries to oppose alleged unfair competition by the Chinese.

China has “created an unfair playing field” by stealing American intellectual property and spying on the U.S. military to gain access to its most sophisticated technology, Sen. Catherine Cortez Masto, D-Nev., said during the Senate hearing.

Rep. Will Hurd, R-Texas, added, “The way you stop this is simply reciprocity.” He was referring to proposals for matching any stiff-necked Chinese economic policies with similar American policies.

“Why do we treat Alibaba like an American company when Amazon is not treated like a Chinese company in China,” Hurd asked the subcommittee.

Alibaba Group is a Chinese multinational technology company specializing in e-commerce and retail sales.

Hurd, who previously worked as a CIA agent specializing in Chinese intelligence operations, described the United States and China as “frenemies,” which means people who are generally friendly with each other despite an intense rivalry.

“If we want to get them to change their behavior, it’s got to hurt,” Hurd said.

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