Additional Recommendations
The Commission recommends:
Congress recognize that autonomous systems—including humanoid robots, industrial automation, and unmanned systems—represent the physical embodiment of artificial intelligence and a critical domain where the People’s Republic of China is rap-idly advancing. To address the challenges from China’s development and deployment of autonomous systems, Congress should direct the President to establish an Interagency Task Force on Autonomous Systems, chaired by the National Security Advisor, to coordinate federal efforts and report to Congress within 180 days with specific implementation plans requiring:
- The U.S. Department of Defense to establish a Robotics and Automation Task Force with authority to rapidly prototype and deploy autonomous systems across military logistics, maintenance, security, reconnaissance, and combat operations;
- The U.S. Department of Commerce to investigate Chinese robotics dumping under applicable trade remedy laws, lead international standards development, and expand export controls on advanced autonomous technologies to China;
- The U.S. Department of Homeland Security to assess vulnerabilities from Chinese-made autonomous systems in U.S. critical infrastructure and establish mandatory cybersecurity standards;
- The U.S. Department of Labor to launch workforce retraining programs and robotics technician certifications for workers displaced by automation;
- The U.S. Departments of Transportation, Energy, Agriculture, and Health and Human Services to accelerate regulatory approvals for autonomous vehicles, infrastructure inspection systems, precision agriculture equipment, and medical robotics;
- The U.S. Department of the Treasury to expand Committee on Foreign Investment in the United States (CFIUS) review of all Chinese investment in U.S. robotics companies and impose sanctions on Chinese robotics firms supporting the People’s Liberation Army; and
- The U.S. Department of State to counter Chinese robotics exports to developing countries and lead allied coordination on autonomous weapons arms control.
China is deploying autonomous systems at scale across its economy and military while the United States remains mired in pilot programs and bureaucratic delays. These systems will transform civilian life, manufacturing, and warfare faster than current U.S. policy anticipates. Without immediate and decisive action across all departments and agencies, the United States will cede a strategic advantage that may prove impossible to recover.
(From Chapter 6: Interlocking Innovation Flywheels: China's Manufacturing and Innovation Engine)
Congress develop legislation to provide for cooperation on and mutual recognition of unfair trade practices.
- The procedures could provide for a voluntary, expedited mechanism to support coordinated application of trade remedies against unfair trade practices, including but not limited to antidumping (AD) and countervailing duty (CVD) orders.
- Under this procedure, the United States and partner countries could recognize that an AD/CVD finding is a finding of an unfair foreign trade practice. The United States could then request a third-party country take action within its own market to ensure a coordinated response to the unfair trade practice, and partner countries could request similar action by the United States.
The United States and its allies and partners have multiple procedures to protect their domestic markets from unfair trade practices. Nonetheless, these procedures are lacking when the exports of domestic firms are harmed by unfair trade practices in third countries. That is, existing authorities enable the U.S. government to protect U.S. manufacturers from products dumped in their home market, but not when those same products are dumped in a third country’s market. The concept of addressing unfair trade practices in third-country markets, alongside home markets, is recognized in international trade law but, in general, has been unutilized, harming U.S. firms and the firms of U.S. allies and partners. (Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, April 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, art. 14, 1868 U.N.T.S. 201; Third-Country Dumping, 19 U.S.C. § 1677k (1994); Regulations Amending the Special Import Measures Regulations, SOR/2023-26, Canada Gazette, Part II, 157, no. 5 (March 1, 2023): 396.)
(From Chapter 8: China Shock 2.0)
Given Hong Kong has become a central global hub for sanctions evasion that supports Russia, Iran, and North Korea, Congress pass legislation to:
- Condition Hong Kong’s continued status as an official off-shore U.S. dollar (USD) clearing center on compliance with U.S. sanctions, including by providing U.S. authorities full visibility into transactions conducted through Hong Kong’s USD Clearing House Automated Transfer System (USD CHATS);
- Direct the U.S. Department of the Treasury to assess the ex-tent to which transactions in Hong Kong via USD CHATS are facilitating evasion of sanctions or export controls and determine the feasibility of replacing it with the Clearing House Interbank Payments System (CHIPS);
- Authorize secondary sanctions for the facilitation of sanctions and export control violations by Chinese and Hong Kong financial institutions, including codifying authorities established by executive order to impose secondary sanctions on Chinese and Hong Kong financial institutions facilitating evasion on behalf of Russian, Iranian, and North Korean entities;
- Direct the U.S. Department of Commerce, Bureau of Indus-try and Security (BIS) to require heightened due diligence for sales of any Common High Priority List (CHPL) items to China or Hong Kong, given China’s role as primary provider of such items to Russia;
- Provide additional resources, technology, and staff to BIS and the Treasury Department’s Office of Foreign Assets Control (OFAC) for enforcement of export controls and sanctions related to Hong Kong; and
- Create a new standing cross-agency enforcement task force with respect to sanctions and export control evasion through Hong Kong, including enforcement personnel relating to money laundering, financial sanctions, and export controls, to enhance overall enforcement efforts to shut down illicit evasion networks running through Hong Kong.
(From Chapter 12: Hong Kong)
Key Recommendations
The Commission recommends:
With respect to imports sold through an online marketplace, Congress eliminate Section 321 of the Tariff Act of 1930 (also known as the “de minimis” exemption), which allows goods valued under $800 to enter the United States duty free and, for all practical purposes, with less rigorous regulatory inspection. Congress should provide U.S. Customs and Border Protection adequate resources, including staff and technology, for implementation, monitoring, and enforcement. (From Chapter 4: Unsafe and Unregulated Chinese Consumer Goods: Challenges in Enforcing Import Regulations and Laws, Key Recommendation II)
Additional Recommendations
The Commission recommends:
The relevant committees of Congress hold hearings to assess the desirability and feasibility of creating a trade defense coalition with other like-minded countries to forestall the risk of a second China shock. Such a grouping would seek to align policies for responding to the recent acceleration in China’s exports of subsidized, underpriced materials and manufactured goods. (From Chapter 6: Key Economic Strategies for Leveling the U.S.-China Playing Field)
Key Recommendations
The Commission recommends:
Congress direct the U.S. Department of Defense to work with European partners to protect the movement of U.S. military equipment, supplies, and personnel from Chinese surveillance via China’s National Transportation and Logistics Public Information Platform (LOGINK) and any other logistics platform controlled by, affiliated with, or subject to the jurisdiction of the Chinese Communist Party or the Government of the People’s Republic of China or any logistics platform that shares data with such a system. Coordination with European partners should include:
- Identifying ports in NATO countries that currently utilize or intend to utilize LOGINK or similar systems from China or other countries of concern;
- Assessing the U.S. military’s current and past potential exposure to Chinese surveillance via LOGINK or similar systems and the risks to U.S. interests and national security resulting from such exposure;
- Identifying and assessing the feasibility of adopting alternative shipping routes through ports that do not currently utilize or intend to utilize LOGINK or similar systems, including by identifying any risks to U.S. military programs, activities, and movements that would be created by attempting to avoid exposure to such systems; and
- Implementing joint measures to mitigate the identified risks of exposure to LOGINK and similar systems in European ports.
(From Chapter 5: Changing Relations with Europe, Taiwan, and Hong Kong, Section 1: Europe-China Relations; Convergence and Divergence in Transatlantic Cooperation, Key Recommendation III)
Additional Recommendations
The Commission recommends:
Congress should require the U.S. Department of State to establish as grounds for student visa revocation any instance where a foreign student surveils on behalf of or reports to any foreign-state intelligence, security, law enforcement, or political party authority the civil or political speech of any other student, or threatens to do so. The Department of State shall develop appropriate evidentiary sources and standards for revocation. (From Chapter 2: China’s Efforts to Subvert Norms and Exploit Open Societies, Section 2: Battling for Overseas Hearts and Minds: China’s United Front Propaganda Work)
Key Recommendations
The Commission recommends:
Congress direct the Administration as part of the Indo-Pacific Economic Framework (IPEF) to negotiate a prohibition on the utilization of China’s National Transportation and Logistics Public Information Platform (LOGINK) or similar systems provided by Chinese state-affiliated entities within IPEF member ports. A two-year transition period shall be provided for existing users of LOGINK or similar Chinese-controlled or -affiliated systems to terminate use of such systems and transition to secure logistics systems with no Chinese control or affiliation. (From Chapter 2: U.S.-China Economic and Trade Relations, Section 4: U.S. Supply Chain Vulnerabilities and Resilience, Key Recommendation #5)
Additional Recommendations
The Commission recommends:
Congress direct the U.S. Department of Commerce to provide regular (semiannual) reports on its enforcement of the foreign direct product rules and its approval of export license applications for entities seeking to export to China items produced from technology or software controlled for national security reasons. Such a report shall not identify U.S. exporters, but it shall include:
- The number of licenses granted;
- The number of licenses granted per export destination;
- Item classifications for such licenses;
- The value of such exports; and
- The rationale for granting the licenses.
(From Chapter 2: U.S.-China Economic and Trade Relations, Section 2: Challenging China’s Trade Practices)
Congress direct the Administration to release a comprehensive public report on the utilization of commercial-off-the-shelf (COTS) procurement of inputs, components, and products from China:
- By the U.S. Department of Defense and contractors in major weapons systems; in Munitions List items; and in Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) items;
- In critical infrastructure as identified by the U.S. Department of Homeland Security; and
- In critical supply chains and sectors as identified in U.S. government agency reports submitted per section 4 of Executive Order 14017 on “America’s Supply Chains.”
- Such a report shall identify the specific items that were purchased, overall quantities, and, where applicable, the value of the contracts in aggregate by item.
(From Chapter 2: U.S.-China Economic and Trade Relations, Section 4: U.S. Supply Chain Vulnerabilities and Resilience)
Additional Recommendations
The Commission recommends:
Congress require the director of national intelligence, in conjunction with the U.S. Department of State and U.S. Department of Defense, to produce an unclassified report, including a classified annex, documenting Chinese investment in port infrastructure in the Western Hemisphere and detailing any known Chinese interest in establishing a military presence at or near these ports. The report should include an assessment of China’s current and potential future ability to leverage commercial ports for military purposes and the implications for the United States. (From Chapter 1: U.S.-China Global Competition, Section 2: China’s Influence in Latin America and the Caribbean)
Key Recommendations
The Commission recommends:
Congress hold hearings to consider the creation of an interagency executive Committee on Technical Standards that would be responsible for coordinating U.S. government policy and priorities on international standards. This Committee would consist of high-level political appointees from executive departments with equities relating to international technical standards, including the Department of Commerce, the Department of State, the Department of Defense, the Department of Energy, the Office of Science and Technology Policy, and other agencies or government stakeholders with relevant jurisdiction. The Committee’s mandate would be to ensure common purpose and coordination within the executive branch on international standards. Specifically, the Committee would:
- Identify the technical standards with the greatest potential impact on American national security and economic competitiveness;
- Coordinate government efforts relating to those standards;
- Act as a liaison between government, academia, and the private sector to coordinate and enhance joint efforts in relation to standards;
- Manage outreach to counterpart agencies among U.S. allies and partners;
- Set funding priorities and recommendations to Congress; and
- Produce annual reports to Congress on the status of technical standards issues and their impact on U.S. national security and economic competitiveness.
(From Chapter 1: U.S.-China Global Competition, Section 2: The China Model: Return of the Middle Kingdom, Key Recommendation #4)
Key Recommendations
The Commission recommends:
Congress enact legislation requiring the following information to be disclosed in all issuer initial public offering prospectuses and annual reports as material information to U.S. investors:
- Financial support provided by the Chinese government, including: direct subsidies, grants, loans, below-market loans, loan guarantees, tax concessions, government procurement policies, and other forms of government support.
- Conditions under which that support is provided, including but not limited to: export performance, input purchases manufactured locally from specific producers or using local intellectual property, or the assignment of Chinese Communist Party (CCP) or government personnel in corporate positions.
- CCP committees established within any company, including: the establishment of a company Party committee, the standing of that Party committee within the company, which corporate personnel form that committee, and what role those personnel play.
- Current company officers and directors of Chinese companies and U.S. subsidiaries or joint ventures in China who currently hold or have formerly held positions as CCP officials and/ or Chinese government officials (central and local), including the position and location.
(From Chapter 3: U.S.-China Competition, Section 1: U.S.-China Commercial Relations, Key Recommendation #3)
Congress hold hearings assessing the productive capacity of the U.S. pharmaceutical industry, U.S. dependence on Chinese pharmaceuticals and active pharmaceutical ingredients (APIs), and the ability of the U.S. Food and Drug Administration (FDA) to guarantee the safety of such imports from China, with a view toward enacting legislation that would:
- Require the FDA to compile a list of all brand name and generic drugs and corresponding APIs that: (1) are not produced in the United States; (2) are deemed critical to the health and safety of U.S. consumers; and (3) are exclusively produced—or utilize APIs and ingredients produced—in China.
- Require Medicare, Medicaid, the U.S. Department of Veterans Affairs, the U.S. Department of Defense, and other federally funded health systems to purchase their pharmaceuticals only from U.S. production facilities or from facilities that have been certified by the FDA to be in compliance with U.S. health and safety standards and that actively monitor, test, and assure the quality of the APIs and other components used in their drugs, unless the FDA finds the specific drug is unavailable in sufficient quantities from other sources.
- Require the FDA, within six months, to investigate and certify to Congress whether the Chinese pharmaceutical industry is being regulated for safety, either by Chinese authorities or the FDA, to substantially the same degree as U.S. drug manufacturers and, if the FDA cannot so certify, forward to Congress a plan for protecting the American people from unsafe or contaminated drugs manufactured in China.
(From Chapter 3: U.S.-China Competition, Section 3: Growing U.S. Reliance on China’s Biotech and Pharmaceutical Products, Key Recommendation #4)
Additional Recommendations
The Commission recommends:
Congress enact legislation requiring the collection of data on U.S.-China economic relations. This legislation would:
- Direct U.S. economic statistics-producing agencies, including the U.S. Census Bureau, the U.S. Department of Commerce’s Bureau of Economic Analysis, and the U.S. International Trade Commission, to review methodologies for collecting and publishing not only gross trade flows data, but also detailed supply chain data to better document the country of origin for components of each imported good before it reaches U.S. consumers.
- Direct the U.S. Census Bureau to restart data releases in its Current Industrial Reports at the ten-digit industry level.
- Direct the U.S. Department of the Treasury to coordinate with the U.S. Census Bureau to match U.S. firm-level data with their U.S. employees’ data.
(From Chapter 3: U.S.-China Competition, Section 1: U.S.-China Commercial Relations)
Congress direct a classified assessment identifying where China has undertaken activities that may be aimed at establishing a military presence, operating location, or storage depot. This assessment would include Chinese state-owned enterprises or other commercial interests tied to the Chinese government investing in strategic assets, such as ports and airfields, and should suggest options that could be employed to dissuade host countries from agreeing to host a Chinese military presence. (From Chapter 4: China’s Global Ambitions, Section 1: Beijing’s “World-Class” Military Goal)
Key Recommendations
The Commission recommends:
Congress direct the U.S. Department of Defense and U.S. Department of Homeland Security to provide to the relevant committees of jurisdiction a report, with a classified annex, assessing how the change in the China Coast Guard’s command structure affects its status as a law enforcement entity now that it reports to the Central Military Commission. The report should discuss the implications of this new structure for China’s use of the coast guard as a coercive tool in “gray zone” activity in the East and South China seas. This report should also determine how this change may affect U.S. Navy and U.S. Coast Guard interactions with the China Coast Guard, and whether the latter should be designated as a military force. (From Chapter 2: U.S.-China Security Relations, Section 2: China’s Military Reorganization and Modernization: Implications for the United States)
Additional Recommendations
The Commission recommends:
Congress direct appropriate jurisdictional entities to undertake a review of (1) the classification of satellites and related articles on the U.S. Munitions List under the International Trafficking in Arms Regulations and (2) the prohibitions on exports of Commerce Control List satellites and related technologies to China under the Export Administration Regulations, in order to determine which systems and technologies China is likely to be able to obtain on the open market regardless of U.S. restrictions and which are critical technologies that merit continued U.S. protection. From Chapter 2: Security and Foreign Policy Issues Involving China, Section 2: China’s Space and Counterspace Programs
Key Recommendations
The Commission recommends:
Congress fund the U.S. Navy’s shipbuilding and operational efforts to increase its presence in the Asia Pacific to at least 67 ships and rebalance homeports to 60 percent in the region by 2020 so that the United States will have the capacity to maintain readiness and presence in the Asia Pacific, offset China’s growing military capabilities, and surge naval assets in the event of a contingency. (From Chapter 2: Military and Security Issues Involving China, Section 2: China’s Military Modernization)
Congress require the Department of the Treasury to include in its semiannual report to Congress specific information in the beneficial economic impact of China moving to a freely floating currency in terms of U.S. exports, economic growth, and job creation. In addition, Congress should urge the Administration to begin immediate consultations of the G-7 to identify a multilateral approach to addressing China’s currency manipulation. (From Chapter 1: U.S.-China Economic and Trade Relations, Section 2: U.S.-China Bilateral Trade and Economic Challenges)
Congress pursue measures to improve the government’s information about drug ingredient and dietary supplement producers, especially for imports. To this end, Congress should urge the Food and Drug Administration (FDA) to work with its Chinese counterparts to establish a more comprehensive regulatory regime for registering China-based active pharmaceutical ingredient producers, and make this producer information available on demand for U.S. agencies. (From Chapter 1: U.S.-China Economic and Trade Relations, Section 3: China’s Health Care Industry, Drug Safety, and Market Access for U.S. Medical Goods and Services)
Additional Recommendations
The Commission recommends:
Congress require future classified and unclassified Department of Defense reports on ‘Military and Security Developments Involving the Democratic People’s Republic of Korea’ to include a full discussion of China’s activities impacting the military and security situation in North Korea. From Chapter 3: China and the World, Section 2: Recent Developments in China’s Relationship with North Korea
Key Recommendations
The Commission recommends:
Congress fund the U.S. Navy’s shipbuilding and operational efforts to increase its presence in the Asia Pacific to at least 60 ships and rebalance homeports to 60 percent in the region by 2020 so that the United States will have the capacity to maintain readiness and presence in the Western Pacific, offset China’s growing military capabilities, and surge naval assets in the event of a contingency. (Chapter 2: China’s Impact on U.S. Security Interests, Section 3: China’s Maritime Disputes)
Congress ensure that the Food and Drug Administration makes it a priority to increase the number of physical inspections of Chinese food imports at the border; to increase the rigor of those inspections to include testing for pathogens and chemical, pesticide, and drug residues, and processed food ingredients; and to conduct more frequent and thorough inspections in food facilities in China. Congress should also urge the USDA to permanently assign inspection personnel to China so that the exporting plants receive regular visits by USDA inspectors. (Chapter 1: The U.S.-China Trade and Economic Relationship, Section 4: China’s Agriculture Policy, Food Regulation, and the U.S.-China Agriculture Trade)
Additional Recommendations
The Commission recommends:
Congress urge the Secretary of Agriculture to engage, as part of the Joint Committee on Commerce and Trade and the Strategic and Economic Dialogue, with his/her Chinese counterparts to address those Chinese policies and practices that limit U.S. exports of value-added products. (Chapter 1: The U.S.-China Trade and Economic Relationship, Section 4: China’s Agriculture Policy, Food Regulation, and the U.S.-China Agriculture Trade)
Congress require that the USDA prepare an annual report on competitive factors in the pork industry. In preparing such reports, the department shall evaluate the impact, if any, of the recent purchase of Smithfield Foods on the ability of other U.S. producers to export pork products to China. In addition, the report shall identify any changing pricing structures throughout the pork production chain to determine whether there is price or profit suppression as a result of the Smithfield transaction. (Chapter 1: The U.S.-China Trade and Economic Relationship, Section 4: China’s Agriculture Policy, Food Regulation, and the U.S.-China Agriculture Trade)
Congress direct the USDA to exercise extreme caution in negotiating equivalency status for Chinese exports of processed poultry using Chinese-origin birds. Congress should also increase its support of USDA’s Food Safety and Inspection Service in its role as protector of meat and poultry food safety so that the United States serves as a world model for high-quality, science-based regulations. (Chapter 1: The U.S.-China Trade and Economic Relationship, Section 4: China’s Agriculture Policy, Food Regulation, and the U.S.-China Agriculture Trade)
Congress evaluate whether a requirement that U.S. food importers purchase insurance against food-borne illnesses and pathogens from Chinese imports would improve food safety. Such a program would involve private sector risk insurance with insurance companies evaluating the safety of various sources and charging risk-based premiums based on the methods employed by Chinese exporters to address food-borne illnesses and pathogens. (Chapter 1: The U.S.-China Trade and Economic Relationship, Section 4: China’s Agriculture Policy, Food Regulation, and the U.S.-China Agriculture Trade)
Key Recommendations
The Commission recommends:
Congress assess the reauthorization of Super 301 to assist in the identification of the policies and practices that China pursues that create the greatest impediment to U.S. exports entering the Chinese market and the most important policies or practices that unfairly or unjustifiably harm U.S. producers and workers in the U.S. market. Priority should be given to addressing such practices by the United States Trade Representative under such legislation. (Chapter 1: The U.S.-China Trade and Economic Relationship, Section 3: Indigenous Innovation and Intellectual Property Rights)
Key Recommendations
The Commission recommends:
Congress request that the administration periodically issue a single report about the volume and seriousness of exploitations and attacks targeting the information systems of all federal agencies that handle sensitive information related to diplomatic, intelligence, military, and economic issues. To the extent feasible, these reports should indicate points of origin for this malicious activity and planned measures to mitigate and prevent future exploitations and attacks. (Chapter 5: China and the Internet, Section 2: External Implications of China’s Internet-Related Activities)
Key Recommendations
The Commission recommends:
Congress grant the authority to the Food and Drug Administration (FDA) to identify and indelibly mark imports of fish that fail to meet the agency’s standards of safety and to seize and destroy shipments of fish that foreign governments report have been contaminated or that subsequently are recalled in that country. The Commission further recommends that Congress pass legislation to institute within the FDA an import inspection and equivalency of standards program for fish similar to the meat and poultry inspection program administered by the U.S. Department of Agriculture. (Chapter 1: The United States-China Trade and Economic Relationship)
Key Recommendations
The Commission recommends:
Congress urge the Administration to seek agreement with China to carry out inspections at sea of ships bound to or from North Korean ports and establish a U.S.-China joint operation to inspect for contraband all shipping containers being moved to or from North Korea when they pass through Chinese ports, in fulfillment of the obligations under U.N. Security Council Resolution 1718 to prevent the sale or transfer of missiles, and nuclear and other weapons-related materials and technologies, to and from North Korea. (Chapter 2: China’s Global and Regional Activities and Other Geostrategic Developments)
Additional Recommendations
The Commission recommends:
Congress enact legislation to define currency manipulation and loan forgiveness as illegal export subsidies subject to countervailing duty penalties levied against an offending country’s exports. (Chapter 1: U.S.-China Trade and Economic Relationship)
Congress provide adequate funding to support an increase in the number of initial and periodic follow-up end-use/end-user verification visits for exports licensed to China and Hong Kong. This should include increasing the number of qualified, Mandarin-speaking export control officers stationed in China and Hong Kong. (Chapter 3: China’s Military Power and its Effects on American Interests and Regional Security)
Key Recommendations
The Commission recommends:
China’s recent exchange rate policy reforms have to date resulted in only a 2.1 percent appreciation of the renminbi (RMB) against the U.S. dollar, leaving the RMB highly undervalued. In the absence of immediate steps to allow the RMB to appreciate by at least 25 percent against the U.S. dollar or a transparent, trade weighted basket of international currencies, the Commission recommends that Congress pursue a four-track policy to move China to take appropriate action to revalue the RMB:
- Congress should press the Administration to file a WTO dispute regarding China’s exchange rate practices. These practices continue to violate a number of its WTO and IMF membership obligations, including the WTO prohibition on export subsidies and the IMF proscription of currency manipulation. Congress should press the Administration to respond to China’s violation of its international obligations by working with U.S. trading partners to bring to bear on China the mechanisms of all relevant international institutions.
- Congress should consider imposing an immediate, across-the board tariff on Chinese imports at the level determined necessary to gain prompt action by China to strengthen significantly the value of the RMB. The United States can justify such an action under WTO Article XXI, which allows members to take necessary actions to protect their national security. China’s undervalued currency has contributed to a loss of U.S. manufacturing, which is a national security concern for the United States.
- Congress should reduce the ability of the Treasury Department to use technical definitions to avoid classifying China as a currency manipulator by amending the 1988 Omnibus Trade Act to (i) include a clear definition of currency manipulation, and (ii) eliminate the requirement that a country must be running a material global trade surplus in order for the Secretary of the Treasury to determine that the country is manipulating its currency to gain a trade advantage.
- Congress should urge the Treasury Department to maintain a high level of pressure on China to take more significant actions expeditiously to revalue its currency and, if such actions are not forthcoming by the time Treasury issues its next exchange rate report, to designate China as a currency manipulator and initiate bilateral and IMF negotiations.
(Chapter 1: U.S.-China Trade and Economic Relationship)
Additional Recommendations
The Commission recommends:
Congress urge USTR to investigate the strength of potential cases against Chinese subsidies categorized as actionable, and to file WTO disputes concerning any subsidies that meet WTO definitions for prohibited subsidies.179 For example, scrutiny is warranted regarding China’s provision of extensive subsidies for the expansion of its domestic paper products industry, which, combined with the elimination of tariffs on raw logs and high-grade paper machines and the maintenance or increase of tariffs on imports of finished wood products, supports the expansion of China’s wood and paper products manufacturing industry at the expense of its trading partners’ industries. (Chapter 1: U.S.-China Trade and Economic Relationship)
The Bureau of Economic Analysis currently compiles international trade data for each ATP product. The Commission recommends that Congress direct the Department of Commerce to present more detailed ATP trade data in a user-friendly format in its monthly publication, U.S. Trade in International Goods and Services. The data should be presented in a table that quantifies U.S. trade in each of the ATP products with the United States’ top ten ATP trading partners, of which China is one. This table should present, for each of the ten countries: (1) the value of U.S. imports of each ATP product from the country; (2) the value of U.S. exports of each ATP product to the country; (3) the country’s trade balance with the United States for each ATP product; and (4) the percentage of total U.S. imports of each ATP product accounted for by imports from that country. These data will facilitate analysis of the import dependency of the United States on specific ATP products and, more precisely, on specific ATP products from specific countries. (Chapter 2: China’s High-Technology Development and Implications for the U.S. Defense Industrial Base)
In cases where diplomatic efforts are unsuccessful in spurring the government of a country such as China to take effective actions to halt proliferating activity, the United States should use its economic leverage to ensure action. In connection with the recommendation above that Congress broaden and harmonize proliferation sanctions, and consonant with recommendations contained in its 2002 and 2004 Annual Reports, the Commission recommends that Congress amend all current statutes pertaining to proliferation to—
- Coordinate and increase the array of sanctions the President is authorized to invoke against foreign governments that directly proliferate WMD, their delivery systems, and associated technologies to include increased import and export limitations; restrictions on access to U.S. capital markets; restrictions on U.S. direct investment; U.S. opposition to loans from international financial institutions; prohibition of loans from U.S. banks; reduction or elimination of foreign assistance; prohibition of arms sales and military financing; elimination of U.S. government credit or credit guarantees; prohibition of U.S. government procurement from any company based in the offending country; and restrictions on science and technology cooperation with or transfers to the offending country. The new authority should require the President to report to Congress the rationale for and proposed duration of the sanctions within 72 hours of imposing them and, in any case where the President waives imposition of such a sanction, the authority should require the President to notify Congress of the justification for that waiver.
- Authorize the President to impose the same sanctions listed above, where applicable, against a country or the government of a country in cases where companies in the country are persistently engaged in proliferation of WMD, their delivery systems, and associated technologies and where the government does not take effective steps to curtail those activities.
(Chapter 4: China’s Global and Regional Activities and Geostrategic Developments)
Congress should press the Administration to give greater priority to its Megaports Initiative and highlight the need for China to reach agreement on this program. Refusal to cooperate on the Megaports Initiative should trigger enhanced inspection procedures on products coming from ports that have been determined to be of concern to U.S. security officials. (Chapter 4: China’s Global and Regional Activities and Geostrategic Developments)
The Commission recommends:
The Commission recommends that Congress direct the administration to work with other interested WTO members to convene an emergency session of the WTO governing body to extend the MFA at least through 2008 to provide additional time for impacted industries to adjust to surges in imports from China. (Chapter 1: China’s Industrial, Investment, and Exchange Rate Policies)
The Commission recommends that Congress press the administration to make better use of the China-specific section 421 and textile safeguards negotiated as part of China’s WTO accession agreement to give relief to U.S. industries especially hard hit by surges in imports from China. (Chapter 2: China in the World Trade Organization: Compliance, Monitoring, and Enforcement)
The Commission recommends that Congress encourage USTR and other appropriate U.S. government officials to take action to ensure that the WTO’s Transitional Review Mechanism process is a meaningful multilateral review that measures China’s compliance with its WTO commitments. If China continues to frustrate the TRM process, the U.S. government should initiate a parallel process that includes a specific and comprehensive measurement system. The United States should work with the European Union, Japan, and other major trading partners to produce a separate, unified annual report that measures and reports on China’s progress toward compliance and coordinates a plan of action to address shortcomings. This report should be provided to Congress. In addition, independent assessments of China’s WTO compliance conducted by the U.S. government, such as USTR’s annual report, should be used as inputs in the multilateral forum evaluating China’s compliance, whether that forum is a reinvigorated and effective TRM or a new process. (Chapter 2: China in the World Trade Organization: Compliance, Monitoring, and Enforcement)
The Commission recommends:
The Commission recommends the Congress support efforts of various government agencies to increase contracts and exports of U.S. goods to China but should monitor and evaluate these efforts to ensure that they are enhancing U.S. job creation and are not increasing capacity in industries that already have excess world capacity. (Chapter 2: Trade and Investment)
The Commerce Department currently interprets the countervailing duty (CVD) law to be inapplicable to NMEs. The Commission recommends that Congress amend the CVD law to specifically state that it applies to NMEs and thereby can be used to protect U.S. industries from unfair competition from the imports of these economies. (Chapter 3: China and the World Trade Organization)
The Commission recommends that the U.S. Government encourage the use of existing U.S.-China state government-to-provincial government and city-to-city bilateral mechanisms to help promote and monitor WTO compliance.
- Congress currently charges the Commerce Department to submit annually a report on U.S. trade promotion activities in the form of the Trade Promotion Coordination Committee (TPCC) report. In addition, the Secretary of Commerce is charged to testify to Congress on that report. During Secretary Evans' recent testimony on that report he discussed the importance of China complying with its WTO obligations and noted that a senior Commerce official would travel to China once a month to evaluate China's compliance efforts. The Commission recommends that Congress request that each annual TPCC report assess China's WTO compliance progress and recommend any additional resources or other initiatives to facilitate compliance, and that this report include a survey of the market access attained by key U.S. industry sectors in China, including agriculture. The report should compare actual market access results with the initial estimates made by the Executive Branch in support of granting China Permanent Normal Trade Relations status and compare U.S. market access in those key sectors with that gained by the European Union and Japan.
- China's WTO accession agreement includes three important China-specific safeguards: the ability of WTO members to use a non-market economy methodology in anti-dumping cases, a product specific safeguard that allows WTO members to restrain Chinese imports that disrupt their domestic markets, and a textile safeguard. Inclusion of these safeguards was a key component of U.S. support for China's accession as they provide important tools to combat unfair trade practices or import surges. The Commission recommends that USTR and the Commerce Department make aggressive use of these safeguards during the limited time period for which they will be available.
- With regard to the WTO China-specific textile safeguard, the Commission recommends that Congress request the Commerce Department to prepare an annual report on the U.S. textile industry addressing whether "market disruption" is occurring with regard to any products in this industry as a result of imports from China. A determination of "market disruption" would trigger the textile safeguard mechanism.
- The Commission recommends that Congress encourage USTR to request consultations at the WTO on China's noncompliance with its obligations under the TRIPs Agreement, in particular the lack of adequate enforcement to reduce and deter counterfeiting and piracy of U.S. motion pictures and other video products. If China's noncompliance in this area is not adequately resolved through such consultations, Congress should encourage USTR to request that a WTO dispute settlement panel be convened on this matter.
- Congress mandated the Commission to evaluate and make specific recommendations for the U.S. Government to invoke Article XXI of the GATT (relating to security exceptions) as a result of any adverse impact on U.S. national security interests. Current trends indicate that China's rapid growth as a steel producer may have an adverse impact on the U.S. steel industry. The_ Commission believes that the steel industry is a likely candidate for using Article XXI, as demonstrated by the Bush Administration's decision to impose temporary safeguard measures on key steel products and President Bush's statements on the importance of the U.S. steel industry to our national security. The Commission therefore recommends that Congress consider using Article XXI to ensure the survival of the U.S. steel industry, if the Administration's current safeguard measures prove ineffective.
- The Commission recommends that Congress renew the Super 301 provision of U.S. trade law to address unfair trade practices that have the greatest impact on U.S. export market opportunities in China and elsewhere.
- The Commission recommends that Congress examine the tools available to the U.S. Government to address market access-limiting practices by China not covered by its WTO obligations, and direct U.S. trade officials to make full use of these tools to protect U.S. export opportunities.
(Chapter 3: China and the World Trade Organization)
Consistent with the recommendations in Chapter 6, the Congress should consider use of financial sanctions that include denial of access to U.S. capital markets to Chinese and other foreign firms found to be involved in proliferation. Unlike trade sanctions, financial restrictions would minimize "collateral damage" to U.S. exports and U.S. jobs. (Chapter 7: Proliferation and Chinese Relations with Terrorist-Sponsoring States)
The Commission recommends that the Congress require that both pre-license and end-user checks be conducted on sensitive exports to China. (Chapter 10: Technology Transfers and Military Acquisition Policy)