[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
THE IMPACT OF INTERNATIONAL TECHNOLOGY
TRANSFER ON AMERICAN RESEARCH
AND DEVELOPMENT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON INVESTIGATIONS AND
OVERSIGHT
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, DECEMBER 5, 2012
__________
Serial No. 112-109
__________
Printed for the use of the Committee on Science, Space, and Technology
Available via the World Wide Web: http://science.house.gov
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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR., EDDIE BERNICE JOHNSON, Texas
Wisconsin JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas LYNN C. WOOLSEY, California
DANA ROHRABACHER, California ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois DONNA F. EDWARDS, Maryland
W. TODD AKIN, Missouri BEN R. LUJAN, New Mexico
RANDY NEUGEBAUER, Texas PAUL D. TONKO, New York
MICHAEL T. McCAUL, Texas JERRY McNERNEY, California
PAUL C. BROUN, Georgia TERRI A. SEWELL, Alabama
SANDY ADAMS, Florida FREDERICA S. WILSON, Florida
BENJAMIN QUAYLE, Arizona HANSEN CLARKE, Michigan
CHARLES J. ``CHUCK'' FLEISCHMANN, SUZANNE BONAMICI, Oregon
Tennessee VACANCY
E. SCOTT RIGELL, Virginia VACANCY
STEVEN M. PALAZZO, Mississippi VACANCY
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
------
Subcommittee on Investigations and Oversight
HON. PAUL C. BROUN, Georgia, Chair
F. JAMES SENSENBRENNER, JR., PAUL D. TONKO, New York
Wisconsin ZOE LOFGREN, California
SANDY ADAMS, Florida BRAD MILLER, North Carolina
RANDY HULTGREN, Illinois JERRY McNERNEY, California
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
RALPH M. HALL, Texas EDDIE BERNICE JOHNSON, Texas
C O N T E N T S
Wednesday, September 12, 2012
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Paul C. Broun, Chairman, Subcommittee
on Investigations and Oversight, Committee on Science, Space,
and Technology, U.S. House of Representatives.................. 11
Written Statement............................................ 12
Statement by Representative Paul D. Tonko, Ranking Minority
Member, Subcommittee on Investigations and Oversight, Committee
on Science, Space, and Technology, U.S. House of
Representatives................................................ 13
Written Statement............................................ 15
Witnesses:
Dr. Robert D. Atkinson, President, Information Technology &
Innovation Foundation
Oral Statement............................................... 16
Written Statement............................................ 19
The Honorable Dennis C. Shea, Chairman, U.S. China Economic and
Security Review Commission
Oral Statement............................................... 33
Written Statement............................................ 35
THE IMPACT OF INTERNATIONAL
TECHNOLOGY TRANSFER ON AMERICAN
RESEARCH AND DEVELOPMENT
----------
WEDNESDAY, DECEMBER 5, 2012
House of Representatives,
Subcommittee on Investigations and Oversight,
Committee on Science, Space, and Technology,
Washington, D.C.
The Subcommittee met, pursuant to call, at 10:09 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Paul C.
Broun [Chairman of the Subcommittee] presiding.
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Chairman Broun. Good morning. The Subcommittee on
Investigations and Oversight will come to order.
Welcome to today's hearing titled ``The Impact of
International Technology Transfer on American Research and
Development.'' You will find in front of you packets containing
our witness panel's written testimony, their biographies, and
their truth-in-testimony disclosures. I now recognize myself
for five minutes for an opening statement.
Good morning, everyone. I welcome to you to today's hearing
that again is entitled ``The Impact of International Technology
Transfer on American Research and Development.'' I want to
thank our witnesses for being here and for being so flexible.
This hearing was originally scheduled back in September, but
because of a last-minute Member briefing regarding the Benghazi
incident, we were forced to postpone this hearing. Ironically,
as we speak, there is enough--there is another briefing on
Benghazi going on right now as well, but we will move ahead. I
apologize for any inconvenience this may have caused any of
you, particularly to our witnesses and Members, and I thank all
of you for your understanding.
This hearing was difficult to organize for other reasons as
well. Many potential witnesses expressed apprehension about
appearing before this Committee to testify on this topic out of
fear of retribution against their business interests by foreign
countries. While they expressed serious concerns to us in
private about the tactics of many foreign countries when it
comes to technology transfer, they worried that speaking out
publically about those tactics would adversely affect them in
those foreign markets.
This is unfortunate, because today's hearing addresses a
topic of great concern to this committee--innovation and U.S.
competitiveness, particularly in international markets. While
the U.S. invests significant taxpayer resources in public as
well as in private sector research and development, other
nations remain dedicated to acquiring the fruits of our labor.
Their efforts to acquire U.S. technology have clearly had a
significant impact on U.S. trade, our GDP, and the U.S.'s
standing as a world leader in research, development, and
innovation. Unfortunately, measuring that impact has proven
very difficult.
Last year, the U.S. taxpayers spent roughly $130 billion on
research and development, and U.S. companies and universities
spent another $310 billion. This doesn't even take into effect
or account the impacts of tax incentives that total over $8
billion. Determining who ultimately benefits from these
investments should be something that government as well as
private sector entities are able to track.
Our concerns are not limited to economic espionage and
theft, even though this is clearly a significant threat. This
Subcommittee has been active in ensuring that federal agencies
under our jurisdiction are prepared for cyber attacks and
insider threats that seek to steal sensitive and proprietary
information. We are here today to discuss something different,
but just as troubling--the policies and practices of foreign
countries that facilitate the transfer of U.S. technology and
intellectual property overseas. This happens in many ways,
sometimes through domestic manufacturing requirements,
sometimes through standards certification, and sometimes
through conditions of foreign investment. These policies, among
others, allow countries to exploit our R&D investments without
making the commensurate investments themselves.
Oftentimes, U.S. companies allow this transfer to take
place because they are faced with a very difficult choice. In
today's global marketplace, companies need access to the
largest markets in order to compete. Sometimes, companies are
faced with the difficult decision to either file for bankruptcy
or agree to detrimental financing terms, such as transferring
their intellectual property, in order to receive additional
investment.
It was reported just last week that a company, A123, a U.S.
company that has received $124 million of its $249 million
grant from the Obama Administration, this to develop battery
technology for electric cars, would file for bankruptcy. As
part of that bankruptcy, A123 planned to sell its business to a
U.S.-based company, Johnson Controls, for $125 million, but
other bidders are able to make better offers at an upcoming
auction that I understand is going to happen tomorrow. China's
Wanxiang Group Corporation has already expressed interest in
procuring A123 and making it entirely possible that the U.S.
taxpayer's investment in A123 will be shipped off to China.
This is just the most recent case. Several other companies that
received significant support from U.S. taxpayers, like
Evergreen Solar, were faced with making difficult decisions,
very similar to this, in order to remain viable.
Time and time again, we have seen U.S. R&D investments,
particularly in sectors that received favorable treatment from
the current Administration like wind, solar, and batteries,
simply be sent overseas. It is a dirty secret that nobody wants
to talk about--not the government agencies that fund the R&D,
not the companies that receive the R&D, not the associations
that represent the companies, and certainly not the foreign
countries that benefit from our R&D investments--investments, I
should add, that ultimately came from money that we borrowed
from China in the first place.
I want to be clear; this is not just about China. This is
not just about green technology. It is happening across the
board. This also isn't about the value of public or private
sector R&D, which everyone realizes is important for economic
competitiveness. Our goal is to better understand the magnitude
of the international technology transfer, ensure that someone
is monitoring these issues, and identify measures to ensure
that U.S. investments are realized by U.S. interests.
Now, I recognize my Ranking Member, my good friend from New
York, Mr. Tonko, for his opening statement.
[The prepared statement of Mr. Broun follows:]
Prepared Statement of Subcommittee Chairman Paul Broun
Good morning, and welcome to today's hearing titled ``The Impact of
International Technology Transfer on American Research and
Development.'' I want to thank our witnesses for being here and for
being flexible. This hearing was originally scheduled in September, but
because of a last minute member briefing by the Secretary of State on
the Benghazi incident, we were forced to postpone. Ironically, there is
another briefing on Benghazi right now as well, but we will move ahead.
I apologize for any inconvenience this may have caused you, and thank
you all for your understanding.
This hearing was difficult to organize for other reasons as well.
Many potential witnesses expressed apprehension with appearing before
the Committee to testify on this topic out of fear of retribution
against their business interests by foreign countries. While they
expressed serious concerns to us in private about the tactics of many
foreign countries when it comes to technology transfer, they worried
that speaking out publically about those tactics would adversely affect
them in foreign markets.
This is unfortunate, because today's hearing addresses a topic of
great concern to this Committee --innovation and U.S. competitiveness.
While the U.S. invests significant taxpayer resources in public and
private sector research and development, other nations remain dedicated
to acquiring the fruits of our labor. These efforts to acquire U.S.
technology have clearly had a significant impact on U.S. trade, GDP,
and our standing as a world leader in research, development, and
innovation. Unfortunately, measuring that impact has proven difficult.
Last year, the U.S. taxpayers spent roughly $130 billion on
research and development, and U.S. companies and universities spent
about another $310 billion. This doesn't even take into account the
impacts of tax incentives that total over $8 billion. Determining who
ultimately benefits from these investments should be something that
government or private sector entities are able to track.
Our concerns are not limited to economic espionage and theft, even
though that is clearly a significant threat. This Subcommittee has been
active in ensuring that federal agencies under our jurisdiction are
prepared for cyber attacks and insider threats that seek to steal
sensitive or proprietary information. We are here today to discuss
something different but just as troubling--the policies and practices
of foreign countries that facilitate the transfer of U.S. technology
and intellectual property overseas. This happens in many ways,
sometimes through domestic manufacturing requirements, sometimes
through standards certification, and sometimes through conditions of
foreign investment. These policies, among others, allow foreign
countries to exploit our R&D investments without making the
commensurate investments.
Often times, U.S. companies allow this transfer to take place
because they are faced with a difficult choice. In today's global
marketplace, companies need access to the largest markets in order to
compete. Sometimes, companies are faced with the difficult decision to
either file for bankruptcy, or agree to detrimental financing terms,
such as transferring intellectual property, in order to receive
additional investment. It was reported just last week that A123, a U.S.
company that has received $124 million of its $249 million grant from
the Obama Administration to develop battery technology for electric
cars, would file for bankruptcy. As part of that bankruptcy, A123
planned to sell its business to U.S.-based Johnson Controls for $125
million, but other bidders are able to make better offers at an
upcoming auction. China's Wanxiang Group Corporation has already
expressed interest, making it entirely possible that the U.S.
taxpayer's investment in A123 will simply go to China. This is just the
most recent case. Several other companies that received significant
support from U.S. taxpayers, like Evergreen Solar, were faced with
making difficult decisions such as this in order to remain viable.
Time-and-time-again, we have seen U.S. R&D investments,
particularly in sectors that received favorable treatment from the
current Administration like wind, solar, and batteries, simply be sent
overseas. It's a dirty secret that nobody wants to talk about--not the
government agencies that fund the R&D, not the companies that receive
the R&D, not the associations that represent the companies, and
certainly not the foreign countries that benefit from our R&D
investments. Investments, I should add, that ultimately came from money
we borrowed from China in the first place.
I want to be clear, that this is not just about China. And this is
not just about green technology. It's happening across the board. This
also isn't about the value of public or private sector R&D--which
everyone realizes is important for economic competitiveness. Our goal
is to better understand the magnitude of the international technology
transfer, ensure that someone is monitoring the issues, and identify
measures to ensure that U.S. investments are realized by U.S.
interests.
Mr. Tonko. Thank you, Mr. Chair.
American citizens have a huge stake in what American firms
do with their innovations. The Federal Government is a key
driver of innovation through federal research laboratories and
its substantial support of research through grants and
contracts. In fiscal year 2012, the Federal Government
appropriated over $140 billion for research and development.
American firms also received support for innovation through the
widely used Research and Experimentation Tax Credits. For 20
years, this tax credit has effectively subsidized research by
private firms, and by 2011, it represented approximately $10
billion a year in savings to companies. This credit obviously
needs to be extended.
Finally, a whole web of public supports ranging from state
budget appropriations to Bayh-Dole Act protections for
intellectual property to student loans and education tax
credits have created an engine of innovation that drives our
economic success in this ideas economy.
The central engine of innovation remains the American
university. Our universities lead the world in producing high-
quality science and engineering students, and they provide a
home for researchers who work at the cutting edge of their
fields to supply the basic ingredients for continued
innovation.
These interconnected public investments have helped make
the United States one of the most innovative economies in the
history of the world with American firms leading in almost
every area. The American people provide this support out of a
belief that innovation will ensure that our economy remains
strong in the long run. They also believe that American firms
that reap the lion's share of these supports will indeed share
the fruits of these innovations with our society in the form of
jobs for hardworking Americans.
When firms instead license that technology abroad, whether
as part of a strategy to build access to foreign markets or
because they wish to move production to lower-wage markets, the
American taxpayer finds that the bargain they made to support
those firms is not as rosy as had been promised. It is no
secret that it is faster and cheaper to adopt technologies than
it is to develop them. It comes as no surprise that with the
development of a global marketplace, the intense competition
for market share and the movement to a more open and integrated
world economy, governments have turned to policies that will
enable their firms to exploit the innovations of others.
I am indeed uncomfortable with the idea that American firms
license away innovations subsidized by our citizens. It is bad
enough that we have lost jobs when firms offshore production
and move out of our communities. The idea that they would
exchange taxpayer-supported innovations for market access,
however reluctantly, is very disturbing to me.
Stating opposition to the practice of foreign governments
adopting policies that bar American firms from doing business
in those countries, absent a local partner and absent a
technology-sharing agreement, is, quite honestly, easy. Finding
a solution is much more complicated. We cannot abandon our
investments in education and research, but our citizens have
the right to expect and require I would note a return on those
investments.
I do not have a policy answer ready to address these
concerns, but I am very interested in hearing the thoughts of
the witnesses today as you are invited to appear before us. And
I thank you again, Mr. Chair, for convening this hearing.
[The prepared statement of Mr. Tonko follows:]
Prepared Statement of Subcommittee Ranking Member Paual D. Tonko
Thank you, Mr. Chairman.
American citizens have a huge stake in what American firms do with
their innovations. The Federal government is a key driver of innovation
through federal research laboratories and its substantial support of
research through grants and contracts. In Fiscal Year 2012, the Federal
government appropriated over $140 billion for research and development.
American firms also receive support for innovation through the widely
used Research & Experimentation tax credit. For 20 years, this tax
credit has effectively subsidized research by private firms, and by
2011 it represented approximately $10 billion a year in savings to
companies. This credit needs to be extended.
Finally, a whole web of public supports ranging from State budget
appropriations to Bayh-Dole Act protections for intellectual property
and through to student loans and education tax credits have created an
engine of innovation that drives our economic success.
And of course, American universities which lead the world in
producing high quality science and engineering students, and which
provide a home for researchers who work at the cutting edge of their
fields supply the basic ingredients for continued innovation.
These interconnected public investments have helped make the U.S.
one of the most innovative economies in the history of the world with
American firms leading in almost every area. The American people
provide the support out of a belief that innovation will ensure that
our economy remains strong in the long run. They also believe that
American firms that reap the lion's share of this support will share
the fruits of those innovations with our society in the form of jobs
for hard-working Americans.
When firms instead license that technology abroad--whether as part
of a strategy to build access to foreign markets or because they wish
to move production to lower-wage markets--the American taxpayer finds
that the bargain they made to support those firms is not as rosy as had
been promised. It is no secret that it is faster and cheaper to adopt
technologies than it is to develop them.
It comes as no surprise that with the idea that American firms
license away innovations subsidized by our citizens. It is bad enough
that we have lost jobs when firms offshore production and move out of
our communities; the idea that they would exchange taxpayer supported
innovations for market access, however reluctantly, is very disturbing
to me.
Stating opposition to the practice of foreign governments adopting
policies that bar American firms from doing business in those countries
absent a local partner and absent a technology sharing agreement is
easy. Finding a solution is more complicated. We cannot abandon our
investments in education and research, but our citizens have the right
to expect a return on those investments.
I do not have a policy answer ready to address these concerns. I am
very interested in hearing the thoughts of the witnesses you have
invited to appear before us today, Mr. Chairman.
Chairman Broun. Thank you, Mr. Tonko. It is really nice
that we are both on the same page in making sure our taxpayers
get a proper return from their investment in these companies.
If there are Members who wish to submit additional opening
statements, your statements will be added to the record at this
point.
At this time, I would like to introduce our panel of
witnesses: Dr. Robert D. Atkinson, President of Information
Technology & Innovation Foundation; and the Hon. Dennis Shea,
Chairman, U.S. China Economic and Security Review Commission. I
thank you all for you all's patience and willingness to have
the flexibility to be here today.
And as our witnesses should know, spoken testimony is
limited to five minutes each after which Members of the
Committee will each have five minutes to ask questions. Your
written testimony will be included in the record of the
hearing. And it is the practice of the Subcommittee on
Investigations and Oversight to receive testimony under oath.
Do either of you have any objection of taking an oath?
Dr. Atkinson. No, sir.
Mr. Shea. No.
Chairman Broun. Let the record reflect that both stated no,
so that is great, instead of shaking their head from side to
side.
You also may be represented by counsel. Do either of you
have any counsel with you here today?
Mr. Shea. I have a couple of very able staffers with me,
but I don't know if they rise to the level of counsel.
Chairman Broun. Okay. Legal counsel is what we are
discussing here.
So let the record reflect that the witnesses have--that
none of the witnesses have counsel.
Now, if you all would please stand and raise your right
hand.
Do you solemnly swear and affirm to tell the whole truth
and nothing but the truth, so help you God?
Dr. Atkinson. I do.
Mr. Shea. I do.
Chairman Broun. You may be seated.
Let the record reflect that the witnesses participating
have taken the oath of truthfulness.
Now, I recognize our first witness, Dr. Atkinson. If you
would, sir, turn on your microphone. You have five minutes. We
are not going to gavel you down at 5 if you take a few seconds
over, but if you would, we have votes a little after 11:00, so
we want to get to questions as quickly as we can. Thank you,
sir.
TESTIMONY OF DR. ROBERT D. ATKINSON, PRESIDENT,
INFORMATION TECHNOLOGY & INNOVATION FOUNDATION
Dr. Atkinson. Thank you, Mr. Chairman. Thank you,
Congressman Tonko. I appreciate the invitation to appear before
you today.
This is a critical issue that you are facing and discussing
today. Many nations are looking to get as much technology,
knowledge, and innovation from other countries who are leaders
like the United States and like Europe, and they are looking to
get it in inappropriate ways as a way to advance their own
economy.
We mentioned China. China is not the only one but they are
the most egregious. For example, in 2011, the Chinese
Government committed to ``place the strengthening of indigenous
innovation capability at the core of economic restructuring.''
Indigenous innovation refers to ``enhancing original
innovation, integrated innovation, and re-innovation based on
assimilation and absorption of imported technology.'' What that
really means in English is they are going to do everything they
can to take as much technology from people who develop it and
get it into their economy and into their firms.
Some of these policies that countries use are quite
legitimate. Countries and firms in other countries buy
technology, they license it, they have policies like R&D tax
credits to spur their own innovation. In fact, we now have the
27th least generous R&D tax credit in the world. But many of
these policies are illegitimate and they violate the spirit if
not the letter of the WTO. And let me just go through a few of
them. We have already talked about some.
IP theft--industrial espionage is up according to the FBI
and according to national security experts. You see high-
profile cases recently like the Chinese stealing chemical
secrets from DuPont, stealing wireless telecom secrets from
Motorola, and stealing and bribing employees and stealing from
an American company called American Superconductor, which is
one of the largest providers of wind turbine software in the
world.
We also see--again, you alluded to this, Mr. Chairman--
state-owned or state-backed companies who will buy U.S.
companies. I think this is going to be an increasing trend.
Again, it is one thing for a private company in another country
to come in and buy a company--our companies do the same--but it
is very different when a company comes in to bid on a U.S.
company where they are backed by the state. They have deep
pockets and many of these, particular in China, are either
state-owned or state-backed, and they have an unfair advantage
when it comes to buying and bidding for U.S. companies. So we
have really got to do a better job, particularly in CFIUS and
other areas like that.
Another area is weak IP protection. Many of these countries
intentionally have weak IP regimes. Even if they look strong on
paper, they are weak in enforcement. We see this, for example,
in data exclusivity in biopharmaceutical firms. We have a 12-
year data exclusivity period in the United States because of
Congress and this is about the minimum seeing as the time that
companies need to be able to recoup their investments in this
highly risky technology. Many countries are trying to weaken
that and have very limited data exclusivity policies for
biotechnology.
I think the most troubling area and the widest area is
basically limiting market access to tech transfer. It is hard
for a small country to do that with just a few million people
because multinationals will say we don't really care about your
market; we will just bypass you. But big countries like Brazil,
India, China, they have essentially a monopsony. They have so
much market power they basically can force foreign companies to
take these unfair extortionist practices and they do that.
China is a good example. In China, it is virtually impossible
for a foreign company to go in there and just open up a factory
or an office so they can--we can do that here. Foreign
companies come here all the time; they can open up here. In
China, they require joint ventures.
Another area is compulsory licensing. Countries that just
simply say we think we want your technology. If you want to
sell it, here, you have to do a compulsory license. We see that
particularly in drugs.
And finally, in procurement where the government itself
says we are not going to buy products unless the company
transfers the technology to our country.
So what should we do about this? The most important thing
we can do about it is exactly what you are doing, which is we
need to raise the issue. I simply don't think enough
policymakers are aware of this, enough people in the media are
aware of the significance of the problem.
But the second thing we need to do is be much more active
in enforcement. And I know there is a budget crisis, but I
think a few million dollars more at USTR would be money very,
very well spent. We spend at least 100 times, if not more,
defending our national security through the Defense Department
than we do defending our economic security through USTR. USTR
is just simply under-resourced to be able to bring the kinds of
cases and the pressures that they need to do.
The second area I think is critical is we have--we can't
solve this problem on our own. We have to do it with our
allies, particularly with Europe. And I would suggest two
things. One is we have got to develop a strategy where European
and American governments actively joint arm and say to
countries like China and Brazil and India that we are just not
going to accept this anymore.
Another area I think to consider there--I know I am
slightly over and I will just stop--is I think we need to think
about joint antitrust exemption. We did this in 1984 with an
antitrust exemption for collaborative R&D for U.S. companies. I
think we need to give companies the tools to say together, if
they are all in the chemical industry, for example, or the
aerospace industry, we are all going to agree that we are not
going to transfer technology to these countries under duress.
If we want to do it on our own, that is one thing, but we are
not going to do it under duress. That way, they can't get
played off against one another.
And finally, we need to make sure that any trade agreements
we sign, including the Bilateral Investment Treaty that is
being negotiated with China right now, are really gold-standard
agreements. I think we put way too much pressure on either this
Administration or the last or any Administration just to sign
agreements. Get an agreement, get an agreement. A bad agreement
is worse than no agreement. We need good agreements. We need
gold-standard agreements. We need to do that with the Trans-
Pacific Partnership Agreement, we need to do it with the China
BIT Agreement, and we need to basically say to the--to any
Administration again, regardless of party, you need to
negotiate trade agreements, but they need to be gold-standard
agreements that protect U.S. interests.
Thank you.
[The prepared statement of Dr. Atkinson follows:]
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Chairman Broun. Thank you, Dr. Atkinson.
Mr. Shea, you are recognized for five minutes.
TESTIMONY OF THE HONORABLE DENNIS C. SHEA,
CHAIRMAN, U.S. CHINA ECONOMIC AND
SECURITY REVIEW COMMISSION
Mr. Shea. Thank you, Chairman Broun, Ranking Member Tonko,
Members of the Subcommittee. I appreciate the opportunity to
speak before you today.
I will share some of the Commission's findings, but the
views I present today are my own.
Technology transfer is just one part of a multi-faceted
strategy by the Chinese Government to move China's economy to a
higher position on the value-added, high-technology industrial
chain and to develop a culture of innovation.
The Commission addresses many of the broader issues in
China's innovation strategy in our 2012 report to Congress,
which was released in mid-November. Today, I will focus my
testimony on Chinese Government efforts intended to transfer
technology from the United States and other developed nations
to China and Chinese companies.
Let me say at the outset that China has made no secret of
its ambition to shift its economy from one dependent on
manufacturing products invented elsewhere to one that produces
products whose intellectual property originates in China. One
of China's key Central Government planning documents, the
``2006 Medium- to Long-Term Plan for the Development of Science
and Technology,'' describes 402 technologies in which China
seeks to gain expertise, and it calls for China to limit its
dependence on foreign technology to just 30 percent by the year
2020. The 12th five-year plan, another Chinese Central
Government plan for economic development, which was adopted
last year, identified seven strategic emerging industries in
which Chinese corporations are expected to become global
champions. These industries include clean energy technology,
biotechnology, and next-generation information technology.
To help achieve its technology goals, China frequently
adopts policies of tech transfer as a condition for foreign
firms 1) to gain access to Chinese markets in certain
industries, 2) to be considered for procurement by the Chinese
Government, and 3) to benefit from Chinese subsidies and tax
benefits.
Depending on the industrial sector, the Chinese Government
requires many foreign companies, as Dr. Atkinson mentioned, to
enter into joint ventures with Chinese firms in order to enter
the Chinese market, the Chinese companies often requiring their
foreign partners to transfer technology as a precondition for
the establishment of the joint venture. Additionally, Chinese
law requires government approval of foreign joint venture
agreements.
Paragraph 7.3 of China's Protocol of Accession to the World
Trade Organization prohibits China from conditioning the
approval of investment by foreign companies on the transfer of
technology, but China claims that it is not violating WTO
prohibitions because the actions taken by foreign companies are
purely business decisions. This argument has been seriously
questioned by the U.S. Government and business groups. Here is
what the USTR said earlier this year, and I quote, ``Although
China has revised many of its laws and regulation to conform to
its WTO commitments, some of these measures continue to raise
WTO concerns, including those that encourage technology
transfers to China without formally requiring them.'' U.S.
companies remain concerned that this encouragement in practice
can amount to a requirement, particularly in light of the high
degree of discretion provided to Chinese Government officials
when reviewing investment applications.
My written testimony goes into greater detail about the
dilemma that U.S. companies face when considering whether to
transfer technology in China. However, I do want to note that
of some 300 U.S. businesses surveyed by the American Chamber of
Commerce in China last year, one in three acknowledged that
either they or their clients had been negatively impacted by
forced technology transfer.
As Dr. Atkinson mentioned, forced technology transfer also
occurs through the Chinese Government procurement policies.
Although China agreed in 2001 to accede as soon as possible to
the voluntary WTO Agreement on Government Procurement, that has
not yet occurred. Without the constraints of the GPA, the
Chinese Government has introduced restrictive procurement laws.
In 2009, Beijing required companies to file applications to be
considered for accreditation as indigenous innovation products
eligible for procurement.
President Hu Jintao came to the United States and said we
are repealing this policy. The policy looks like it has been
repealed at the Central Government level, but--the message
hasn't gotten to all the provinces, which have huge procurement
markets as well. So this is an issue that needs continuing
monitoring by the Federal Government.
Another issue is the issue of patents. The impetus to
register local patents is also being reinforced by the rising
number of utility model patents issued in China. While such
patents are used throughout the world, they are subject to less
rigorous and expensive review processes in China. Utility model
patent holders in China cannot just patent troll, using patents
as a ploy to either exclude foreign competitors or to justify
intellectual property theft.
As companies continue to transfer technology to China, many
will face increased competition and pressure from Chinese
firms. They may even find that they are excluded from a large
part of China's market that they had hoped to gain access to,
and that they would have access to if China had adhered to
international trade norms. Instead of the reciprocal trade
relationship that we should have with a WTO partner, China's
conditioning access to their markets on the transfer of
technology results in the loss of American jobs and harms the
American economy.
Two points, as I mentioned in my written testimony, I don't
believe reciprocity is a bad word. Maybe we ought to be
demanding some reciprocity in this relationship. And secondly,
I agree with the point, the importance of putting pressure on
China on a multilateral basis. Let's work with the Europeans,
the Japanese, and other partners to deal forcefully with these
issues.
Thank you very much.
[The prepared statement of Mr. Shea follows:]
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Chairman Broun. Thank you, Mr. Shea.
I thank you all for your testimony.
Reminding Members that Committee rules limit questions to
five minutes each. The Chair at this point will open the first
round of questions. I now--the Chair recognizes himself for
five minutes.
Dr. Atkinson mentioned that China often requires that U.S.
companies create R&D facilities in China as a condition of
market access. How does creation of an R&D facility lead to the
transfer of R&D investments in intellectual property? And I ask
both of you all that question. Maybe we will start with Mr.
Shea and then we will come to Dr. Atkinson since you started
off the----
Mr. Shea. Well, I would say 20 years ago, western companies
would happily transfer technology because the technology wasn't
that advanced. But as production cycles have gotten much, much
shorter, the Chinese know that they--they are not willing to
accept just the old stuff. They know what is out there and what
is new. So it is hard to say with respect to a specific
facility.
Western companies go to China. From what they have told us,
they put in significant protocols to protect that IP in that
facility from theft. Whether it works or not is subject to
question.
Chairman Broun. Dr. Atkinson?
Dr. Atkinson. So when I was in Nanjing about, I guess, a
year-and-a-half ago on a delegation and we visited a Ford Motor
Company facility there where, first of all, Ford had opened a
factory--which, again, by Chinese rules they had to do a joint
venture--and as a condition of the joint venture they had to
open up an R&D laboratory. And as we were in the facility, we
looked across the little road they were building another
building and I asked what is that? And they said that is the
second R&D facility to go with the second factory.
Now, what is the problem with that? There are two problems
with that. One is that is R&D that Ford would otherwise would
probably be doing here. And so we are missing out on those jobs
and the technologies that would happen. And secondly, as Mr.
Shea alluded to, that technology just doesn't stay within the
Ford facility. Those are mostly Chinese scientists and
engineers working in that facility who, some of them will take
that technology to their joint venture partners; they will take
it to other companies in China and just turn it over if you
will.
Chairman Broun. And exclude U.S. interest?
Dr. Atkinson. Absolutely. The entire goal there is to
fundamentally exclude U.S. company interest and foreign company
interest over the next decade.
Chairman Broun. Are either of you aware of any federal
effort to proactively monitor the technology transfer issue as
an economic policy matter rather than a national security
matter? Dr. Atkinson?
Dr. Atkinson. I am not. We have basically haphazard and
not-very-well-coordinated efforts. I think this is an issue
that the National Intelligence Committee--Service group is
looking at as well as DOD because they see it as critical to
our defense and intel interests. But they don't have any
systematic--a way right now of looking at how bad this problem
is. And we certainly don't do it out of the Department of
Commerce or USTR, so it is very haphazard. We don't really know
what is going on as much as we should.
Chairman Broun. Mr. Shea.
Mr. Shea. Mr. Chairman, in our 2011 report--I know Ranking
Member Tonko asked for some policy solutions--in our 2011
report we have two recommendations--if I may read them--that
may attempt to address this issue. First, we recommend that
Congress hold hearings to assess the success of the strategic
and economic dialogue in a Joint Committee on Commerce and
Trade in addressing Chinese actions to implement its WTO
commitments, including with regard to the issue of tech
transfer. And in preparation for such hearings, Congress should
request that the Government Accountability Office prepare an
inventory of specific measures agreed to as part of these
bilateral discussions. So let us see if these discussions,
which are supposed to produce results, are actually producing
results, specifically with respect to the issue of tech
transfer.
The other issue--the other recommendation from our 2011
report is that Congress ask the Government Accountability
Office again to undertake an evaluation of investments and
operations of U.S. firms in the Chinese market and identify
what federally supported R&D is being utilized in such
facilities and the extent to which and on what terms such R&D
has been shared with Chinese actors in the last 10 years.
Chairman Broun. Very good. My time is just about expired,
but if you all have any more specific solutions, I don't have
time to ask my next question, but we will go forward. If you
all have any other suggestions or solutions to try to monitor
this, I would appreciate it.
Now, I will recognize Mr. Tonko for five minutes.
Mr. Tonko. Thank you, Mr. Chair.
Dr. Atkinson, you state in your testimony that, and I
quote, ``China is still largely a technologically developing
nation forcing companies from developed nations to transfer
their technology, and that is as a faster way to innovation
success than engaging in the hard work to move up the
technology learning curve as European and American companies
have had to do.'' In your opinion, why is it that American
firms are so quick to give away their technology inherited
through generations of innovators and a federal investment when
there are so many examples that the Chinese would just use this
technology to compete not only in China, but also in other
global markets and in America as in your example of high-speed
rail?
Dr. Atkinson. Thank you. I think there are two reasons. One
is it is not just American firms, though in the high-speed rail
case I think is a classic where Kawasaki transferred high-speed
rail technology to the Japanese as a condition of them being
able to sell them equipment for the largest high-speed rail
system in the world, and then a few years later, the Chinese
state-owned enterprise, started to outcompete them in third-
party markets. So even countries where the firms have a longer-
term horizon, they get forced to do this because they are faced
with a Hobson's Choice. They can either do this or they are
left out of the market completely. So that is why I think joint
action is so important.
But I do think the second reason is that American companies
are under much shorter time horizon pressures to show returns
because of the way our equity markets are structured, and so
they oftentimes don't have the ability to--or the patience to
say, well, you know, we are not going to do this because we
know in ten years it is going to be a problem. It is going to
help us right now but in ten years it is going to be a problem.
I think the way equity markets are structured in other
countries sometimes gives other companies more leeway.
Mr. Tonko. Thank you. And the United States Government has
invested heavily in promoting electric vehicles, and as you
note in your testimony, Dr. Atkinson, the Chinese Government
precluded the Chevy Volt from qualifying for alternative fuel
vehicle subsidies unless GM agreed to transfer their
engineering secrets to a joint venture in China. However, GM
did not let this deter them from entering this market. They
conducted a separate agreement to transfer battery and other
electric car technology to a Chinese joint venture.
So while I agree that China should be opposed in the
policies they are currently pursuing to gain advantage, how can
we encourage a new firm culture that would more aggressively
protect American ingenuity and innovation? And do firms bear no
social responsibility for the consequences of their conduct?
Dr. Atkinson. Well, what I would worry about is if we
somehow said to U.S. companies you can't transfer any
technology under duress to China and somehow we could pass a
rule or a law to that effect--my worry would be that it would
just simply give foreign competitors the competitive advantage.
We see this, for example, in the competition between Airbus and
Boeing. China is the largest-growing aviation passenger market
in the world--jet market in the world--and if you are not in
that market as either Boeing or Airbus, you are in tough shape.
Now, if we were to, for example, say to Boeing you just can't--
you can't help COMAC; they are a state-owned enterprise. You
can't help them; you can't do anything. They are just going to
basically say, okay, we are going to get everything and we will
pressure Airbus.
So I think--again, I go back to this. I think that is where
we have to basically go--with the Japanese who are facing this
exact same problem and the Europeans--and we have to all act
collectively because you are right, Mr. Tonko. It is not in the
interest of U.S. companies to do this, but it is very, very
hard for them to resist this.
Mr. Tonko. And finally, if either of you could make
recommendations from the Federal Government perspective, and I
know that Mr. Shea offered some comments, but are there any
within the programs of agencies that we oversee such as NIST or
DOE or NSF or NASA? Is there anything you would recommend
with--in association with those given agencies?
Dr. Atkinson. I haven't thought extensively about that, but
just a couple of quick thoughts. One, you could require that
those agencies who are funding technology projects monitor the
use of those technologies and where they end up being
commercialized as a first step, which we don't do. So again, it
is not to say that--I would not put a hard ban on anything.
There are real reasons why you might want to go and
commercialize something in Canada, for example, but we at least
ought to know exactly what is going on with these when we are
transferring or helping firms with federally supported R&D at
home.
Mr. Tonko. Mr. Shea, any thoughts?
Mr. Shea. Well, NASA's Jet Propulsion Laboratory was the
subject of a major hacking attempt. I would make sure that NASA
reported to you whether there was any dissipation of technology
as a result of that hacking. This is not related to those
specific agencies, sir, but this antitrust exemption is
something that we recommended in 2010 that Congress explore
with respect to the airplane industry. We looked at the offset
requirements being imposed on airplane manufacturers. If you
want to sell airplanes to China, you have got to build
facilities in China. And we thought maybe the major companies
should get together and collectively resist these efforts, and
that may require an antitrust exemption. So that should be
looked at.
Mr. Tonko. Thank you very much.
Chairman Broun. The gentleman's time is expired.
I now recognize Dr. Benishek for five minutes.
Dr. Benishek. Thank you, Mr. Chairman.
This is really interesting to me and to see how this works
because obviously these American companies, you know, are doing
this voluntarily because they want the business that is
available in China. And the thing that Mr. Tonko just talked
about to me seems to be the crux of the issue is that if
companies want to do this freely, I don't see, you know, why
they shouldn't, but if the American people are paying for the
technology, you know, shouldn't there be some sort of a limit
as to, you know, what these private companies can do with the
technology if it is somehow associated with a taxpayer
investment?
I mean that to me is the crux of the issue. I mean they
wouldn't do business in China unless they thought it was in
their best interest to do that, but since some of the funding
comes from the government, is there--we touched a lot over--a
little bit with Mr. Tonko. Was there some way of doing that
that is not completely--you know, I mean you mentioned doing
something in Canada and I can understand that, but is there
some way we can do that better without completely closing off
that, you know, the good part of the market? Do you understand
my question? I am just trying to figure that out.
Dr. Atkinson. I do. I--just a couple of points and then I
will try to provide an answer. I do think that a lot of this is
not voluntary, that--the intellectual property theft, the--so
there are certain parts where they just take it.
Dr. Benishek. Yeah, okay.
Dr. Atkinson. And then there is another component where
companies give it, but they essentially have a gun to their
head. So it is----
Dr. Benishek. But then they could not do business. I mean
they could just not go there. I mean they have that option,
right? I mean that is the truth.
Dr. Atkinson. It is true, but as I think as I said in my
opening, they have that option with regard to Zimbabwe, but
they don't have it--they really don't have it with--you know,
they could just say we are going to avoid China and Brazil and
India, but it essentially--Mr. Tonko's point, that also
consigns them to a long-term competitive disadvantage and
perhaps decline because they are just not in those markets----
Dr. Benishek. Right.
Dr. Atkinson. --and their competitors would be in those
markets and gain the market share. So I do think that it is
worth exploring, perhaps some rules about where--what companies
can do if it is clearly federal technology that has been
supported where there is a grant involved for an R&D project. I
think it is definitely worth exploring where those can be
commercialized and made.
One thing I would really strongly encourage you to do is as
we move forward, which I hope we do as a country with a trade
agreement with Europe, I think that is a very important next
step that we get the Europeans to adopt the same policies with
regard to all of their science and technology and framework
programs. Again, if we both have the same policies about what
our technology can be used for, it is going to be harder for
those countries to play us off against each other.
Dr. Benishek. So as I understand, the Chinese don't really
prosecute this theft part of it, you know, the actual people
stealing the technology, which you must have, you know,
safeguards in that in other countries where employees are not
allowed to do that, but apparently that is not enforced in
China or that is a problem.
Mr. Shea. Yeah, I think that is fair to say, Congressman.
They have great laws. The laws are on the books. They have
courts but they don't enforce the laws effectively. Going back
to your question about R&D and taxpayer-funded R&D being used
in China and then taken in China, the recommendation that we
made in 2011 I think has been acted upon by Congressman
Rohrabacher if I am not mistaken, so thank you for doing that.
So that might be--getting a handle on the problem, getting a
handle on the extent of what is going--what is being siphoned
out would be a good first step.
I just want to share this issue of competitive pressure
and, you know, forced technology transfer; you are right; it is
voluntary. I mean no one is forcing you to do business in China
but companies, because there is such a large market, feel
compelled. And I had a conversation that still sticks in my
memory about 20 years ago. I guess it was 1990. I was part of a
group that met with Akio Morita, who is the founder of Sony, a
great innovative company at the time. And one thing that he
said that the U.S. did wrong was it had too short a--companies
had too short a time horizon. And he specifically said this--
quarterly reporting is a bad thing because it forces companies
to look for short-term profits rather than a longer investment
timeline. That thought has stuck with me for these many years.
Dr. Benishek. I thank you.
I will yield back the remainder of my time.
Chairman Broun. Thank you, Dr. Benishek.
Next person I will recognize is my friend from North
Carolina, Mr. Miller, for five minutes.
Mr. Miller. Thank you, Dr. Broun.
Mr. Shea, my questions are along the lines of what you just
spoke to, corporate governance issues. I do agree with your
testimony. I agree with the premise of this hearing that we
should resist the policies of the Chinese Government. They are
harming our economy. They are harming American workers, our
ability to take advantage of our own investments and
innovation. But I wonder if we are naive to think that the
corporations that are subject to this are truly American
corporations. They really do want to resist--that they really
are being bullied into doing something contrary to the
interests of the American economy and that that--and they
really want to do that.
In the last presidential campaign for all the talk of small
business, which I think we should encourage, you would think
that we were a nation of yeoman farmers and shopkeepers and
artisans when in fact our economy is being dominated by
enormous corporations, increasingly enormous corporations. The
Economist ran a piece on that just two or three weeks ago. And
they are not really American corporations. They may be
incorporated in Delaware but they are international,
international in the scope of their operations, international
in their ownership.
There was a piece this morning or yesterday in a
publication--internet publication called Business Insider by
Henry Blodget that said a theme that I have heard before that a
generation ago American corporations saw themselves as having a
variety of stakeholders, including their own workers, including
the communities in which they have operations, including their
own country. They were American corporations. And that has now
been replaced completely by a philosophy or at least a stated
philosophy that everything that corporate management did should
be in the interest of making more profit. Is it the case that
corporations are going to take into account at all the interest
of the American economy? Should they? And how do we make that
so?
Mr. Shea. Well, that is a very big statement. I will say,
you know, Clyde Prestowitz has written a book on this issue----
Mr. Miller. You have got two minutes and 25 seconds to
answer this.
Mr. Shea. Okay. The pressures--corporations are with--
American corporations are undoubtedly expanding. Their
operations are moving on a global basis. I don't think we can
expect U.S. companies to ignore 2.5 billion consumers in China
and India. So I completely appreciate the desire of U.S.
companies to reach out to these markets and to tap into that
consumer base. The question is what about our own productive
capacity? What about our own manufacturing capacity? How does
that diminish it?
Our Commission looks at the U.S.-China relationship. We
don't look at U.S. domestic policies or U.S. corporate
governance policies. That is not something that we feel is
within our Commission's mandate. But I think you raised some
very good points. Do the interests of large corporations
converge with the interests of the United States Government? It
used to be said that what is good for GM is good for America.
Is that necessarily true today? Again, this is not something
that we--these are not the types of issues that--I am copping
out here, sir. These are not the issues that the Commission
itself looks at, but I think you have raised some valid points
that deserve exploration. And there has been some good work on
corporate governance issues by people like Prestowitz, by
people like Ralph Gomory and others who have some very strong
opinions on these matters.
Dr. Atkinson. Now, I----
Mr. Miller. Mr. Atkinson, yeah.
Dr. Atkinson. So when I got my Ph.D. at North Carolina back
in the '80s, I was involved a lot with the state government----
Mr. Miller. You are playing to your audience now.
Dr. Atkinson. And--but I will note one of the things that
North Carolina built its economy on after World War II and even
through the '80s was the movement of firms from the north who
frankly had no loyalty to the north. They were Michigan
companies or Delaware companies or Massachusetts--I mean they
came down to North Carolina because the business climate was
good. We are seeing that same dynamic today all around the
world, and I think we can like it or we cannot like it. I
really don't think there is anything we can do about it.
I think fundamentally it is incumbent upon us to do two
things. One is to make the U.S. business environment the best
in the world, which means in part protecting our multinational
companies from these pressures and this extortion that they are
facing overseas. The second thing, we have the highest
corporate tax rate in the world now, we have the 27th-worst R&D
tax credit, we haven't funded science and research the way
other competitors have, so I think we have got to do much more
of that.
Just on this point about what the companies' interests are,
there is a very good book by a finance professor at
Northwestern that came out last year called ``Saving Capitalism
from Short-Termism,'' and his argument is that the role of
companies is to maximize shareholder value. And the problem is
if U.S. companies increasing the maximized short-term
shareholder value, not long-term net present value shareholder
value. And that is exactly the dynamic we see in China.
So I think dealing with corporate governance is important
but I don't think we have to sacrifice or get rid of the notion
that companies are there to make a profit. They are just under
pressures to make the wrong kind of profit I would argue today.
Chairman Broun. The gentleman's time is expired.
I ask unanimous consent that Mr. Rohrabacher, who is not a
Member of this Committee, be allowed to ask questions.
Hearing no objections, Mr. Rohrabacher, you are recognized
for five minutes.
Mr. Rohrabacher. Thank you very much, Mr. Chairman.
This issue has a lot of layers to the onion, and we have
heard the term extortion of our companies who go there and
extortion of our business leaders. I think it is very hard to
extort someone who is a willing accomplice.
We have had a couple generations now of CEOs who are Ivy
League trained and part of their training isn't being loyal to
the United States of America or to the people of the United
States. Their Ivy League training, which quite often includes
hostile analysis of current history and past history, making
the United States look not like the--what most of believe it
should be, which is the bastion of liberty and justice and the
shining city on the hill like Mr. Reagan used to talk about,
but instead that we are the--at the root cause of much of the
world's problems. So we have CEOs who were trained in terms of
their history not to be necessarily fans of their own country.
And then we have CEOs who seem to also--so they don't feel
obligated to do something that is in the best interest of our
country--they just don't. There are many CEOs who don't believe
that.
But what is even more disturbing, Mr. Chairman, is we have
CEOs who don't feel they have to do something in the best
interest of their own corporation, much less their own
employees. And we have just heard testimony talking about the
short-term business decision by our corporations. Well, those
are short-term business decisions made by specific individuals
who head those corporations who may take short-term profit,
give themselves bonuses, and get the hell out before the long-
term consequences to their own company is being felt, much less
the employees of the company.
I think we are all in this together as Americans whether
you are talking about employees or employers, and we should be.
I mean the world depends on us having a certain dedication to
the principles that our Founding Fathers thought was going to
unite Americans. But we don't seem to have it. And I don't
believe it is a product of extortion. I think it is a product
of people joining on to what I see as an enemy camp, but at
least it is an immoral force in this world.
Are many of the--let me just note I think we need to
restructure our system so that the corporate leaders do have
long-term interests rather than the short-term quarterly
profits that we heard about today. I personally believe, for
example, that we should add into our system incentives to
promote employee ownership, which would let the employees help
pick the CEOs, give them a voting share, make sure they are
involved with this whole process so that in the long run
employees think of themselves as 20- or 30-year employees. CEOs
see themselves as three- to five-year CEOs. Thus their notion
is not as long-term as their own employees.
But back to the basic issue here. How many of these
companies that are benefitting from ripping off American
technology development and the taxpayers who have paid for much
of the development of the technology of these corporations who
the CEOs are going over there and making these sweetheart
deals--how much of that--how many of these companies that are
benefitting over there are owned by the People's Liberation
Army? I mean you keep hearing the Chinese corporations buying
this and buying that. Are these really fronts for the Chinese
military?
Mr. Shea. I don't know. That is the short answer. But
people in America need to realize that the Chinese economy is
significantly owned by the state. We have estimated that the
Chinese economy, 40 to 50 percent of it is state-dominated. So
that the issue of dual-use capability is something that is very
important.
We, last year, examined this issue with respect to U.S.
support for the development of the Chinese aviation industry.
There are a couple of very large Chinese aviation companies
that want to make competitors to the Airbus and to the 737 and
commissioned a research report that talks about the potential
application of the technology that gets transferred for
military purposes. The Chinese are already undergoing a
significant military modernization program. They have something
called the J20, a fifth-generation stealth fighter.
Mr. Rohrabacher. Let me interrupt at this point because my
time is running out. Let me just note----
Mr. Shea. Sure.
Mr. Rohrabacher. --everything he is saying, Mr. Chairman,
is sinful against the United States of America. If we have a
potential enemy--I think China is our adversary today, but it
certainly has to be put in the potential enemy category--for us
to have paid for the research and development that helped our
airlines and our aviation and our aerospace industry, for them
then to work in joint projects with the Chinese that then give
Chinese companies these capabilities. And then we find out--
which we will find out--that these Chinese aviation companies
are all fronts for the People's Liberation Army, that is the
people who actually own those companies, we will have
transferred the equivalent--and by the way, I understand the
Boeing was negotiating with the Japanese. Just six months
before Pearl Harbor, they were negotiating with selling the
Japanese the blueprints for the B-17, which turned out to be
most important bomber of World War II. We need to make sure
that our technology is not going to someone who will be killing
Americans five years down the line or ten years down the line.
Chairman Broun. The gentleman's time is expired.
Mr. Rohrabacher. Thank you.
Chairman Broun. And I agree with the gentleman from
California. Economic as well as military espionage is a
tremendous issue that we face, but that is not the real issue
here in this hearing. But I would be very eager to hear maybe
until this date even further what you are saying, Mr. Shea and
Dr. Atkinson, any further comments on that question.
I thank you all for your valuable testimony today. Again,
thank you for your flexibility and willing to come back and
short-term notice for cancellation last time and willing to
come back for this valuable testimony that you have given to us
here today.
I know I have many other questions that I will present to
you all for written response, and I will appreciate an
expedited response because it will be included in the official
record. I know other Members of the Committee may have other
questions also besides the ones that I have. We need to make
sure that we have a way of monitoring this information
transferred to these foreign entities, particularly in cases
such as Mr. Rohrabacher was talking about that maybe even going
to our enemies, both economic enemies as well as military
enemies. So I am eager to hear you all's suggestions about how
we can monitor these things and even develop policies that will
help prevent the transfer, particularly of those--the research
and development that is funded by our taxpayers to these
foreign entities and where they take advantage of our largess.
Members of the Subcommittee, you all have two more weeks
for additional comments from Members to present questions to
these very good witnesses. And I want to thank the Members of
the Subcommittee since this will be the last hearing of this
Congress. I am not sure who is going to be on this Committee in
the next Congress.
Mr. Tonko, I have had a tremendous pleasure working with
you during this Congress as my Ranking Member, and I appreciate
your help. It has been great. When we see throughout Congress
so much bipartisan--very little bipartisanship and very little
mutual interests by Members on opposite sides of the aisle, it
has been great working with you and working with your staff.
And I thank the Democrat staff as well as all the Republican
staff for working with me and with us on our side. And it has
been just a tremendous blessing to me to work with you, Mr.
Tonko. And I appreciate your being here in this situation.
We will see what the next Congress offers as far as this
Committee is concerned and look forward to where this Committee
goes because we have a lot of things, as you know and the
Committee knows on both sides, that we have looked at a lot of
issues in this Congress that I am still interested in and want
to continue to pursue investigation and oversight of many
issues. And this is another one that we just absolutely I think
is critical for our taxpayers, American citizens, and American
businesses that we prevent the transfer of the research and
development, particularly that that is paid for by U.S.
taxpayers and that other foreign companies benefit from that
investment by our taxpayers and then turn around and compete
unfairly in a global market. So it is something that I am going
to continue to be interested in.
So thank you. I thank you, Mr. Tonko, and----
Mr. Tonko. Mr. Chair?
Chairman Broun. Mr. Tonko, you are recognized.
Mr. Tonko. Yes, Mr. Chair, if I might. Thank you for the
partnership and sincere desire to build cooperation. Your
staff, too, is to be commended for working so well with our
team. And I enjoy this Committee assignment and we thank you
for the cooperation.
Chairman Broun. Well, thank you, Mr. Tonko. And a closing
remark, Mr. Miller was the Chairman in the last Congress and I
was the Ranking Member, and I just want to tell you, as you
leave Congress, I am going to miss you being on this Committee
and I have enjoyed working with you, Mr. Miller, and I wish you
well in whatever endeavors that you undertake as you go back to
North Carolina or whatever you do. And I wish you well and
tremendous amount of blessings. And I wish everybody in the
Committee staff as well as Committee Members a very Merry
Christmas and happy holidays.
With that, the witnesses are excused. The hearing is now
adjourned. And thank you all very much.
[Whereupon, at 11:11 a.m., the Subcommittee was adjourned.]