[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
ECONOMIC DANGER ZONE: HOW AMERICA
COMPETES TO WIN THE FUTURE VERSUS CHINA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON INNOVATION, DATA, AND
COMMERCE
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 1, 2023
__________
Serial No. 118-3
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Published for the use of the Committee on Energy and Commerce
govinfo.gov/committee/house-energy
energycommerce.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
51-706 PDF WASHINGTON : 2023
-----------------------------------------------------------------------------------
COMMITTEE ON ENERGY AND COMMERCE
CATHY McMORRIS RODGERS, Washington
Chair
MICHAEL C. BURGESS, Texas FRANK PALLONE, Jr., New Jersey
ROBERT E. LATTA, Ohio Ranking Member
BRETT GUTHRIE, Kentucky ANNA G. ESHOO, California
H. MORGAN GRIFFITH, Virginia DIANA DeGETTE, Colorado
GUS M. BILIRAKIS, Florida JAN SCHAKOWSKY, Illinois
BILL JOHNSON, Ohio DORIS O. MATSUI, California
LARRY BUCSHON, Indiana KATHY CASTOR, Florida
RICHARD HUDSON, North Carolina JOHN P. SARBANES, Maryland
TIM WALBERG, Michigan PAUL TONKO, New York
EARL L. ``BUDDY'' CARTER, Georgia YVETTE D. CLARKE, New York
JEFF DUNCAN, South Carolina TONY CARDENAS, California
GARY J. PALMER, Alabama RAUL RUIZ, California
NEAL P. DUNN, Florida SCOTT H. PETERS, California
JOHN R. CURTIS, Utah DEBBIE DINGELL, Michigan
DEBBBIE LESKO, Arizona MARC A. VEASEY, Texas
GREG PENCE, Indiana ANN M. KUSTER, New Hampshire
DAN CRENSHAW, Texas ROBIN L. KELLY, Illinois
JOHN JOYCE, Pennsylvania NANETTE DIAZ BARRAGAN, California
KELLY ARMSTRONG, North Dakota, Vice LISA BLUNT ROCHESTER, Delaware
Chair DARREN SOTO, Florida
RANDY K. WEBER, Sr., Texas ANGIE CRAIG, Minnesota
RICK W. ALLEN, Georgia KIM SCHRIER, Washington
TROY BALDERSON, Ohio LORI TRAHAN, Massachusetts
RUSS FULCHER, Idaho LIZZIE FLETCHER, Texas
AUGUST PFLUGER, Texas
DIANA HARSHBARGER, Tennessee
MARIANNETTE MILLER-MEEKS, Iowa
KAT CAMMACK, Florida
JAY OBERNOLTE, California
------
Professional Staff
NATE HODSON, Staff Director
SARAH BURKE, Deputy Staff Director
TIFFANY GUARASCIO, Minority Staff Director
Subcommittee on Innovation, Data, and Commerce
GUS M. BILIRAKIS, Florida
Chairman
LARRY BUCSHON, Indiana JAN SCHAKOWSKY, Illinois
TIM WALBERG, Michigan, Vice Chair Ranking Member
JEFF DUNCAN, South Carolina KATHY CASTOR, Florida
NEAL P. DUNN, Florida DEBBIE DINGELL, Michigan
DEBBIE LESKO, Arizona ROBIN L. KELLY, Illinois
GREG PENCE, Indiana LISA BLUNT ROCHESTER, Delaware
KELLY ARMSTRONG, North Dakota DARREN SOTO, Florida
RICK W. ALLEN, Georgia LORI TRAHAN, Massachusetts
RUSS FULCHER, Idaho YVETTE D. CLARKE, New York
DIANA HARSHBARGER, Tennessee FRANK PALLONE, Jr., New Jersey (ex
KAT CAMMACK, Florida officio)
CATHY McMORRIS RODGERS, Washington
(ex officio)
C O N T E N T S
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Page
Hon. Gus M. Bilirakis, a Representative in Congress from the
State of Florida, opening statement............................ 1
Prepared statement........................................... 4
Hon. Jan Schakowsky, a Representative in Congress from the State
of Illinois, opening statement................................. 7
Prepared statement........................................... 8
Hon. Cathy McMorris Rodgers, a Representative in Congress from
the State of Washington, opening statement..................... 9
Prepared statement........................................... 11
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 16
Prepared statement........................................... 18
Witnesses
Jeff Farrah, Executive Director, Autonomous Vehicle Industry
Association.................................................... 20
Prepared statement........................................... 23
Answers to submitted questions............................... 177
Marc Jarsulic, Senior Fellow and Chief Economist, Center for
American Progress.............................................. 42
Prepared statement........................................... 44
Answers to submitted questions............................... 180
Samm Sacks, Cyber Policy Fellow, International Security Program,
New America.................................................... 55
Prepared statement........................................... 57
Answers to submitted questions............................... 182
Brandon J. Pugh, Policy Director and Resident Senior Fellow,
Cybersecurity and Emerging Threats, R Street Institute......... 66
Prepared statement........................................... 68
Answers to submitted questions............................... 186
Submitted Material
Inclusion of the following was approved by unanimous consent.
Letter of February 1, 2023, from John Bozzella, President and
Chief Executive Officer, Alliance for Automotive Innovation.... 112
Report of the Alliance for Automotive Innovation, ``Ready to
Launch--Autonomous Vehicles in the U.S.: Tracking the current
(and future) AV landscape,'' December 2022..................... 115
Report of the Alliance for Automotive Innovation, ``Policy
Roadmap to Advance Automated Vehicle Innovation: A Four-Year
Plan to Revolutionize Transportation,''........................ 129
Letter of September 9, 2021, from Mrs. Rodgers, et al., to
Secretary Pete Buttigieg, Department of Transportation......... 142
Report of the China Task Force, House of Representatives,
September 2020\1\
Amendment to Rules Committee Print 117-8......................... 147
Letter of June 28, 2021, from Mark A. Riccobono, President,
National Federation of the Blind, to Chair Jim McGovern and
Ranking Member Tom Cole, House Committee on Rules.............. 150
----------
\1\ The report has been retained in committee files and is available at
https://docs.house.gov/meetings/IF/IF17/20230201/115346/HHRG-118-IF17-
20230201-SD008.pdf.
Press release of April 2, 2020, ``JTA, Beep & NAVYA AVs Help
Transport COVID-19 Tests Collected at Mayo Clinic Drive-Thru,''
Jacksonville Transportation Authority.......................... 152
Commentary of July 30, 2021, ``Tuya may be the China threat that
beats Russia's ransomware attacks,'' by Hal Brands and Klon
Kitchen, The Hill.............................................. 155
Letter of February 1, 2023, from the Competitive Carriers
Association, et al., to Mr. Bilirakis, et al................... 158
Letter of January 31, 2023, from the Consumer Brands Association
and the Information Technology Industry Council to Mr.
Bilirakis and Ms. Schakowsky................................... 160
Letter of January 31, 2023, from Catherine Chase, President,
Advocates for Highway and Auto Safety, to Mr. Bilirakis and Ms.
Schakowsky..................................................... 165
Report of the Center for Strategic and International Studies,
``Empty Bins in a Wartime Environment: The Challenge to the
U.S. Defense Industrial Base,'' by Seth G. Jones, January
2023\2\
Letter of February 1, 2023, from Aric Newhouse, Senior Vice
President, Policy and Government Relations, National
Association of Manufacturers, to Mr. Bilirakis and Ms.
Schakowsky..................................................... 171
Article of January 26, 2023, ``Intel's horrible quarter revealed
an inventory glut and underused factories,'' by Kif Leswing,
CNBC........................................................... 174
----------
\2\ The report has been retained in committee files and is available at
https://docs.house.gov/meetings/IF/IF17/20230201/115346/HHRG-118-IF17-
20230201-SD024.pdf.
ECONOMIC DANGER ZONE: HOW AMERICA COMPETES TO WIN THE FUTURE VERSUS
CHINA
----------
WEDNESDAY, FEBRUARY 1, 2023
House of Representatives,
Subcommittee on Innovation, Data, and Commerce,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:32 a.m. in
2322 of the Rayburn House Office Building, Hon. Gus M.
Bilirakis (chairman of the subcommittee), presiding.
Members present: Representatives Bilirakis, Bucshon,
Walberg, Duncan, Dunn, Lesko, Armstrong, Allen, Harshbarger,
Cammack, Rodgers (ex officio), Schakowsky (subcommittee ranking
member), Castor, Dingell, Kelly, Blunt Rochester, Soto, Trahan,
Clarke, and Pallone (ex officio).
Staff present: Michael Cameron, Professional Staff Member,
Innovation, Data, and Commerce; Jack Heretik, Press Secretary;
Jessica Herron, Clerk, Innovation, Data, and Commerce; Peter
Kielty, General Counsel; Emily King, Member Services Director;
Tim Kurth, Chief Counsel, Innovation, Data, and Commerce;
Brannon Rains, Professional Staff Member, Innovation, Data, and
Commerce; Lacey Strahm, Fellow, Innovation, Data, and Commerce;
Teddy Tanzer, Senior Counsel, Innovation, Data, and Commerce;
Hannah Anton, Minority Staff Assistant; Ian Barlow, Minority
FTC Detailee; Waverly Gordon, Minority Deputy Staff Director
and General Counsel; Daniel Greene, Minority Professional Staff
Member; Tiffany Guarascio, Minority Staff Director; Lisa Hone,
Minority Chief Counsel, Innovation, Data, and Commerce; Joe
Orlando, Minority Senior Policy Analyst; and C.J. Young,
Minority Deputy Communications Director.
Mr. Bilirakis. The Subcommittee on Innovation, Data, and
Commerce will come to order.
The Chair recognizes himself for 5 minutes for an opening
statement.
OPENING STATEMENT OF HON. GUS M. BILIRAKIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Good morning, everyone. It is great to be here. Welcome to
the first hearing for the Innovation, Data, and Commerce
Subcommittee for the 118th Congress. I would like to thank the
chair of the full committee for selecting me to chair this
important panel, and I would also like to congratulate, again,
Cathy McMorris Rodgers for being the first woman to serve as
the chair of the powerful Committee on Energy and Commerce, the
best committee in Congress. It really is. There is no question.
OK. I also want to identify our new members, our new
Republican members of the subcommittee: Mr. Allen from the
State of Georgia; Mr. Fulcher from Idaho; Ms. Harshbarger from
the State of Tennessee; and then, of course, Mr. Duncan.
And I am glad to see you are back on the subcommittee from
the great State of South Carolina.
And then we also have, of course, the great friend of mine,
Kat Cammack, from the great State of Florida, and she
represents Gator Nation.
Finally, I want to thank my esteemed colleague, Tim Walberg
from the great State of Michigan, for serving as vice chair of
the committee. I am greatly looking forward to working with Mr.
Walberg, and I appreciate his partnership. We are going to do
great things in this committee.
So Ranking Member Schakowsky, who did an outstanding job as
the chair in the previous Congress, I am glad to see you are
leading the subcommittee again.
And for our friends across the aisle, we worked very hard
together last Congress moving forward very good success, great
initiatives that went to the President's desk. This included
legislative wins like the INFORM Consumers Act, which will
protect consumers from stolen and counterfeit goods online,
including those coming from China, and my bill, the Ransomware
Act, which requires the FTC to submit recommendations on how to
make America more resilient from ransomware and cyber attacks,
specifically from cross-border foreign threats like China and
Russia.
Switching gears, today's hearing focuses on the great
threat to our country right now: China. So it is fitting that
to begin the 118th Congress we focus on this threat and discuss
how to recapture and maintain our global leadership.
The CCP will stop at nothing to undermine our global
leadership and weaken our economy. They bought up our
farmlands, stole our intellectual property, and embedded
themselves deep within many of our supply chains. Now they are
turning their attention towards establishing the global
standards for emerging technologies. We are not going to let it
happen.
The CCP has invested heavily in artificial intelligence and
other emerging technologies. Paired with this investment, China
is creating favorable environments for their private-sector
companies and entrepreneurs to deploy and test these
technologies. This has forced many American companies with
global footprint and American innovators with cutting-edge
ideas to consider a hard decision: whether to move their
operations from American to Chinese shores.
It is also allowing Chinese companies to invest and expand
further, potentially endangering our own infrastructure and
data security. Waiting any further on a national framework is
weakening our stance by the day, and time is of the essence. I
can't emphasize that enough: Time is of the essence.
It is imperative that this committee establishes
foundational frameworks for developing emerging technologies.
We came close last Congress when we passed the bipartisan,
bicameral American Data Privacy and Protection Act. But this
Congress we need to ensure it gets across the finish line,
because China is not waiting on us to influence international
norms and standards.
And I want to commend the previous chairman, Mr. Pallone,
and the previous ranking member, Mrs. Rodgers, for getting it
through committee, which was really incredible, historic. Now
we have got to get it across the finish line as soon as
possible.
I look forward to working again with Chair Rodgers, Ranking
Members Schakowsky and Pallone, and the members of this
committee to finish what we started. We need to get this done,
and it is a priority. It is a priority for the American people.
We must ensure our Nation remains a leader in global technology
standards.
The American people are the most innovative in the world. I
know you know this. It is our job in Congress to ensure that we
eliminate bureaucratic red tape that has too often hampered
innovation in the marketplace. For something like autonomous
vehicles that will help senior citizens and Americans living
with disabilities, it means reducing barriers to testing and
setting the standards for how they will be adopted across the
world and provide certainty for businesses and consumers.
America's global leadership depends on its people to be the
best in class, and we must give them the regulatory certainty--
remember, that is the key--on emerging technologies they need
in order to live up to their legacy. If we fail, America will
be left behind and our competitors, like China, will leave us
in the dust.
Again, we are not going to let that happen.
I am eager to hear from our panel of experts today on such
a critical topic. Thank you again to the witnesses for being
here today.
[The prepared statement of Mr. Bilirakis follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Bilirakis. And I yield back. The Chair recognizes
subcommittee Ranking Member Schakowsky for 5 minutes for an
opening statement.
OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you so much, Chairman Bilirakis. I am
so excited to be back here on this--in the subcommittee,
working with you and working with our new members and working
with our returning members on both sides of the aisle.
You know, we were so successful passing bipartisan
legislation in the last Congress. There was hardly any
difference between us. And so I really look forward to
continuing to do this.
And I did want to mention--you talked a bit about the
challenge of competitiveness with China. And I want to
congratulate you on maintaining our jurisdiction. There is a
new special committee dealing with China. So thank you for
making sure that this idea of our competitiveness and our
ability to compete in a positive way with all of our
competitors and certainly adversaries--so good work in making
that happen.
But I did also want to mention some of the things that we
did. You mentioned a couple of these bills, but I want to say
that we were able to pass out of the full committee the
consumer protection and the--our legislation on--the privacy
legislation that we were able to get out of the House, the
American Data Privacy and Protection Act. And I am hoping and
looking forward to as a priority to try and move that.
Americans want to do that.
We passed the Consumer Protection and the Recovery Act. We
also passed out of the--into law Reese's Law, protecting
children; the INFORM Consumer Act, which is not only good for
consumers but for businesses that have been losing money; the
STURDY Act, protecting children from furniture that falls over
on them; the Ransomware Act; and the Restoring Brand USA. These
were two of your bills that I was happy to cosponsor. The
Manufacturing.gov Act, Safety Sleep for Babies, the FTC
Collaboration--is that right--Act of 2022; the Carbon Monoxide
Poisoning Prevention Act. I mean, so many things for consumers,
for ordinary people that we were able to pass into law.
But I definitely do want to say that let's make a priority
of passing our privacy bill. I think this will really put us on
the right track.
And let me also say there is--we know that there is a lot
of work to be done to make our supply chain resilient, and we
need to work on that. Also--and we face these new challenges
with the growth of our artificial intelligence that we need to
address.
And let me just say in closing now is the time for us to
come together. We can do this. We have done this. And I really
look forward to the advances that we are going to make for
consumers, for business, and for the economy of our country.
[The prepared statement of Ms. Schakowsky follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. I yield back.
Mr. Bilirakis. I thank the ranking member. The Chair
recognizes the chair of the full committee, Mrs. Rodgers, for 5
minutes for her opening statement.
OPENING STATEMENT OF HON. CATHY McMORRIS RODGERS, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
Mrs. Rodgers. Thank you, Mr. Chairman. Welcome, everyone,
to the first hearing of the Innovation, Data, and Commerce
Subcommittee of the 118th Congress. It is great to have
everyone here, and I would like to congratulate my good friend
Congressman Gus Bilirakis on becoming the chairman of this
subcommittee, as well as my friend Mr. Walberg for being the
vice chair of the committee.
This committee plays a vital role in advancing American
competitiveness and global technological leadership, and it is
critical that we use this panel to ensure that America, not
China, is setting the rules of the road for technologies of
tomorrow.
It is no secret that the Chinese Communist Party wants to
replace the United States as a global economic and
technological power. Whether it is artificial intelligence,
self-driving cars, or smart devices, China wants to dominate
these new and emerging technologies.
But China's vision of the future is not one that welcomes
American values, values like freedom of speech, privacy,
entrepreneurial enterprise, individual rights, or the rule of
law. The Chinese Communist Party, on the other hand, spies on
its citizens and asserts strict government control over
businesses and the economy. We need to make sure that these
technologies of the future are developed in an ecosystem that
promotes American values, not China's. And this is a race that
we cannot afford to let them win.
We must work together to cement America's global
technological leadership. We should start by passing
comprehensive privacy and data security protections with one
national standard. We made history last year when we passed the
bipartisan, bicameral American Data Privacy and Protection Act
53 to 2 out of this committee, full committee. But our work
isn't over yet, and we have already fallen behind other
countries in establishing a national privacy standard.
I want to thank Mr. Pallone and Ms. Schakowsky and, of
course, Mr. Bilirakis for his leadership on this. And I am
eager to continue that work. It is a top priority for
Americans, and it needs to be achieved this Congress. And we
can't stop there.
It is also important that we take action to ensure the
development and the deployment of self-driving cars. The
regulatory framework for self-driving cars must be led in the
United States.
And again, this comes down to our values versus the Chinese
Communist Party. America values, the importance of safety for
our citizens. China does not. We value our workforce and free
market economies. China does not. We value civil society groups
and their right to speak freely. China does not.
To win the future, the United States must lead on self-
driving cars. We must chart a path so the road is one we
design. And this can be the year we finally push past the
barriers which have derailed the SELF DRIVE Act and other
legislation from becoming law.
And we can also build on the America COMPETES Act
legislation, which I had sponsored in the 116th Congress and
worked with then-Chair Ms. Schakowsky to get passed, and it was
on promoting emerging technologies, which is--was enacted with
many provisions of--led by members of this committee.
The best way to beat China is to spur innovation and remove
unnecessary, burdensome regulatory barriers. We cannot and we
should not even try to beat China at their game of massive
government handouts and centralized industrial policy. We won't
outspend them, and authorizing billions of taxpayer dollars
without removing burdensome red tape will only lead to waste.
Instead, we need to encourage innovation, ingenuity, and
entrepreneurship. That is the backbone of our economy, and that
can only be achieved with a government that encourages low
barriers to entry for innovative technologies and startups, and
the adoption of emerging technologies that will improve
people's lives.
Ensuring Federal agencies don't put undue burden on
businesses and innovators will be a top priority for this
Congress. Whether it is ensuring people's online information is
secure, charting an achievable path towards the development and
the deployment of self-driving cars in the United States, or
setting the global standards for AI and other emerging
technologies, this subcommittee is at the center of it.
You know, the American ingenuity built its first car.
America built its first car in 1893. And then we went on to
dominate manufacturing the car for over 100 years. And we must
secure and win the future in the auto and the tech sector. You
know, I look forward to working with every Member on this panel
to preserve our global leadership, strengthen our economic and
national security, and beat China. My door is always open.
I want to thank the witnesses for all being here. Your
testimony is critical in educating all of us.
[The prepared statement of Mrs. Rodgers follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mrs. Rodgers. And I yield back.
Mr. Bilirakis. Thank you, Madam Chair, for your testimony.
I appreciate it.
Now I will recognize the ranking member of the full
committee, Mr. Pallone, for 5 minutes.
OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Chairman, and congratulations again
on your being made the chairman of the subcommittee.
America's economic competitiveness has helped cement
America's technological, political, and national security
dominance, but our Nation's competitiveness is facing
unprecedented challenges. For three decades the Institute for
Management Development designated our Nation's economy as one
of the five most competitive in the world. Three years ago,
during the Trump administration, that ranking plummeted to
10th.
Globalization, protectionist policies, and extraordinary
market interventions by our economic rivals are key reasons for
this drop. The Chinese Government, a frequent purveyor of
predatory economic practices, has adopted policies to give
Chinese companies an unfair competitive advantage. This
includes massive tax breaks and subsidies for Chinese
companies, stifling restrictions on access to the Chinese
market, currency manipulation, foreign mergers and
acquisitions, forced technology transfers, and intellectual
property theft.
Their goal is to dominate high-tech industries like 5G,
supercomputers, artificial intelligence, and advanced
manufacturing that are essential to economic prosperity and
military superiority in the 21st century. And as a result,
American manufacturers, innovators, and workers are operating
at a competitive disadvantage. Chinese manufacturers' output
rose by 170 percent between 2008 and 2021. Over that same
period, the U.S. production only grew by 12 percent.
Chinese companies now dominate the market for vital
telecommunications network equipment, smartphones, commercial
drones, and photovoltaic cells for solar panel production.
China is also the largest producer of lithium battery cells and
is making strides in the production of electric vehicles.
Now, fortunately, these unprecedented challenges to our
economic prosperity and competitiveness are not going
unchallenged. Last Congress, congressional Democrats delivered
by taking bold action to strengthen our manufacturing base,
help create good-paying jobs for American workers, unleash more
innovation, and lower costs for consumers.
The CHIPS and Science Act was one of the major laws that we
passed last Congress, and it invests $52.7 billion to spur
American semiconductor production. It will ensure more
superconductors are produced right here in the United States,
end our reliance on other countries like China, and lower costs
for consumers for automobiles, consumer electronics, home
appliances, and other goods. It also invests 1.5 billion to
support the deployment of innovative, American-made
telecommunications equipment to help counter the spread of
harmful network equipment like China-backed Huawei. The CHIPS
and Science Act was a major win for our global competitiveness,
for our economy, for our consumers.
Based on the title of today's hearing, you would have
thought congressional Republicans would have been running to
the floor to vote yes on this bill, but only two Republicans on
this committee supported it. The other 27 opposed it. While the
overwhelming majority of Republicans opposed the CHIPS and
Science Act, we have an opportunity to double down on these
monumental victories and enact more vital competitiveness
legislation into law this Congress.
And I know my--I know that both Chairman Bilirakis and our
Ranking Member Schakowsky mentioned the American Data Privacy
and Protection Act, which is the comprehensive privacy
legislation that myself and Chairwoman Rodgers sponsored last
Congress, and this bill ensures that consumers, wherever they
reside in this country, will have meaningful control over their
personal information, while providing clear and consistent
rules of the road on privacy and data security to innovators,
entrepreneurs, and small tech companies.
And I would also like to see us move the supply chain
resilience subtitle in the America COMPETES Act, which passed
out of the House last Congress. This would create a new office
within the Department of Commerce responsible for leading a
governmentwide effort to support manufacturing and strengthen
supply chains critical to the Nation's economic vitality and
national security.
We can continue to blaze a path to a more competitive,
stronger economy by building on the work of the last Congress.
But one thing we cannot do is dangerously play chicken with the
debt limit, as House Republicans are threatening to do. House
Republicans have pledged the Nation's full faith and credit to
force devastating cuts to Social Security, Medicare, and
Medicaid. And that is not the way to ensure our Nation leads
the pack economically.
So I hope congressional Republicans realize the severe
economic consequences of this action might have, and I also
hope we can begin to work on bipartisan solutions to bolster
our economy and to outcompete the world. And I urge a strategy
that is bipartisan and that will return to responsible
governance, working in the interests of all Americans.
I think all of us have America and our constituents at
heart, and we can work together as we have in the past to
achieve bipartisan solutions that deal with this challenge from
China and other competitors.
[The prepared statement of Mr. Pallone follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Pallone. So I yield back. Thank you, Mr. Chairman.
Mr. Bilirakis. I thank the ranking member. We have now
concluded with Members' opening statements.
The Chair would like to remind Members that, pursuant to
the committee rules, all Members' opening statements will be
part of the record.
We would like to thank all of our witnesses for being here
today and taking the time to travel to Washington, DC, to
testify before the subcommittee. Today's witnesses will have 5
minutes to provide oral testimony, which will be followed by a
round of questions from Members.
Our witness panel for today's hearing will include Mr. Jeff
Farrah, the executive director of the Autonomous Vehicle
Industry Association--welcome, sir; Mr. Marc Jarsulic, who is a
senior fellow and chief economist at the Center for American
Progress--welcome; Ms. Samm Sacks, cyber policy fellow,
International Security Program for New America--welcome; Mr.
Brandon Pugh, policy director and resident senior fellow at R
Street Institute. We appreciate you being here, as well.
So, Mr. Farrah, we will begin with you, and you have 5
minutes. Thank you.
Mr. Farrah. Thank you.
Mr. Bilirakis. My pleasure.
STATEMENT OF JEFF FARRAH, EXECUTIVE DIRECTOR, AUTONOMOUS
VEHICLE INDUSTRY ASSOCIATION; MARC JARSULIC, SENIOR FELLOW AND
CHIEF ECONOMIST, CENTER FOR AMERICAN PROGRESS; SAMM SACKS,
CYBER POLICY FELLOW, INTERNATIONAL SECURITY PROGRAM, NEW
AMERICA; AND BRANDON J. PUGH, POLICY DIRECTOR AND RESIDENT
SENIOR FELLOW, CYBERSECURITY AND EMERGING THREATS, R STREET
INSTITUTE
STATEMENT OF JEFF FARRAH
Mr. Farrah. Chair Rodgers, Ranking Member Pallone, Chairman
Bilirakis, Ranking Member Schakowsky, distinguished members of
the committee, it is my honor to be here before you today.
I am privileged to lead the Autonomous Vehicle Industry
Association, which is the unified voice of the AV industry and
represents leading automotive, technology, trucking, and
transportation companies. Our mission is to advocate for the
safe and timely deployment of autonomous technology that will
increase safety, expand mobility, and boost supply chains.
We appreciate the strong leadership that has come from this
committee in past Congresses and look forward to working with
you this year.
It is important to recognize that autonomous vehicles are
not science fiction. They are here today. Across the United
States, autonomous driving technology is being applied to
passenger vehicles, trucks, delivery vehicles, and shuttles.
AVs are operating in Arizona, Arkansas, California, Florida,
Michigan, Texas, Washington State, and more.
It is key to understand why developers are focused on
bringing AV technology to market. It is not an exaggeration to
say that safety motivates everything that the AV industry does,
and AVs will make Americans safer. After all, AVs don't speed,
they don't drive drunk, and they don't drive distracted. Sadly,
human drivers do all of those things, and the Department of
Transportation has affirmed that human behavior is the
overwhelming contributor to the 43,000 deaths on American roads
that we suffered in 2021, which is an 11 percent increase over
the year before.
Our industry offers a solution to this tragic problem.
Autonomous vehicles are safer than human drivers because they
use advanced technology to develop a real-time three-
dimensional view that informs the automated driving system,
which is the brain that drives the vehicle without the need for
human input. AVs are capable of making quicker decisions with
many more inputs than a human driver.
Beyond improving safety, AVs have the potential to
radically improve mobility for the elderly and disability
communities. AVs are also starting to show how they can ease
the supply chain crisis and deliver environmental benefits.
Let's turn to the issue of AV adoption worldwide. American
AV companies have the most advanced autonomous vehicles, and
billions of dollars have been invested in innovative companies.
But unfortunately, the United States is at severe risk of
falling behind the rest of the world on AV public policy, which
could deny Americans the technology's lifesaving and mobility
benefits.
One competitor is the Chinese Government, which has made AV
development a top priority and highlighted AVs in its Made in
China 2025 Strategic Initiative. These measures are producing
autonomous companies with global aims. China's focus on
advancement in this space should be alarming, as no American
policymaker should want to see a world where China dominates
the AV market. This scenario presents national security
challenges and would also mean that the U.S. would not see much
of the job creation from a prosperous AV industry.
The United States cannot assume it will win the global AV
race, thereby securing a leadership position in what many
estimate will be a multitrillion-dollar market opportunity. For
the United States to win the AV race, we must put in place a
national policy framework focused on deployment and
commercialization.
The time is long past due, as efforts to enact a national
AV framework have stalled in recent years. Twenty-two States
have taken action to authorize deployment of autonomous
vehicles on their roads. State-by-State action is not ideal,
but it has become important for AV advancement in the absence
of a Federal framework.
I detail what a Federal policy framework should look like
in my written testimony, which includes reforming the vehicle
exemption process that is harming commercialization and
completing agency rulemakings that remove barriers to
deployment. This action would send a strong message that our
country is determined to be the global leader on the next great
technological change for our world.
We are at a crossroads for the American AV industry, and
frankly, we need your help. Make no mistake: The United States
can lead the way on autonomous vehicles. But policymakers must
prioritize AV policy, and do so with urgency.
Thank you for the opportunity to testify today, and I look
forward to any questions you may have.
[The prepared statement of Mr. Farrah follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Bilirakis. Thank you, Mr. Farrah. Now we will recognize
Mr. Jarsulic.
You are recognized, sir, for 5 minutes.
STATEMENT OF MARC JARSULIC
Mr. Jarsulic. Thank you, Chairman Bilirakis and Ranking
Member Schakowsky, for the opportunity to testify at this
important hearing.
Today I will focus briefly on three points: the importance
of a strong manufacturing sector for economic competitiveness
and national security; the requirements for success in advanced
manufacturing; and the need for effective industrial policy to
support that success.
First on manufacturing--the importance of manufacturing
competitiveness. Manufacturing has historically been a source
of productivity growth and high-wage employment. Much of
manufacturing productivity growth is derived from innovation.
It is the adoption of new technologies. The ability of many
U.S. manufacturers to operate at the technical frontier has
made U.S. manufactured goods competitive internationally. And
until recently, the U.S. was the largest manufacturing
exporter.
While in the aggregate much of U.S. manufacturing
productivity remains at the frontier, the competitive lead has
been eroded. For example, in recent decades German
manufacturing total factory productivity growth, which is
commonly used as a measure of innovation, has exceeded that of
the U.S.
U.S. manufacturing has also been challenged by the rise of
China as a competitor. China has overtaken the U.S. as the
world's leading manufacturer--or leader in manufacturing value
added, and leads the U.S. in manufacturing exports. In
addition, the Chinese Government is devoting considerable
resources to move ahead in crucial areas such as artificial
intelligence, advanced robotics, energy-saving vehicles,
biopharma.
These challenges to U.S. leadership in advanced
manufacturing create both economic and security risks. The
reduction in domestic auto production over the past 2 years
caused by semiconductor chip shortages illustrates the economic
risk posed by disruptions to semiconductor supply chains.
Security risks are illustrated by the Department of Defense's
ongoing reliance on Asian producers of microprinted circuit
boards, which are essential to many national defense electronic
systems.
Let me now talk briefly about the requirements for advanced
manufacturing. Advanced manufacturing success has four basic
elements: scientific discovery; the ability to translate new
science into prototypes and new processes; standards and tests
to control quality; and a well-trained workforce.
Because private actors can't capture all the benefits of
investing in these requirements--it is hard, for example, to
keep scientific ideas secret, or to prevent well-trained
workers from going elsewhere--the level of investment in each
of these can be insufficient. When there are public goods
obstacles of this kind, policy can help to overcome them.
In the 1990s, for example, SEMATECH, an industry-government
consortium, helped to develop semiconductor manufacturing
processes and novel measuring techniques. These collaborations
helped maintain industry competitiveness.
Let me now say something about the need for effective
industrial policy. With the major exceptions of support for
basic scientific research and defense-related investments by
DARPA and other agencies, domestic policy has not
systematically focused on manufacturing in recent decades.
Given the challenges facing U.S. industry, this neglect has not
been benign.
It is, therefore, encouraging that several pieces of
legislation passed in the last Congress include important
industrial policy measures. The bipartisan investment--the
Bipartisan Infrastructure Act is a major step in restoring and
upgrading basic public infrastructure. The CHIPS Act provides
substantial new support for basic scientific research in
strategic areas, public and private partnerships with industry,
STEM education and workforce training, and standard-setting by
NIST. The Inflation Reduction Act provides important incentives
for private investment in clean energy and climate-related
production over the next decade.
Taken together, these three bills provide support for
public goods and create private-sector incentives that will
strengthen our manufacturing competitiveness and national
security.
In conclusion, it is reasonable to say that a competitive
advanced manufacturing sector delivers important economic and
security benefits. It is also reasonable to say that U.S.
manufacturing is more likely to stay on a competitive frontier
and to minimize economic and security risks if it is supported
by effective industrial policy. These facts make industrial
policy a crucial area for future action.
Thank you for your attention. I would be happy to answer
any questions you may have.
[The prepared statement of Mr. Jarsulic follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Bilirakis. Thank you very much. I want to thank the
witnesses for sticking to the 5 minutes--or under the 5
minutes. Good timing.
OK. Now we will recognize Ms. Sacks for her 5 minutes of
testimony. Thank you.
STATEMENT OF SAMM SACKS
Ms. Sacks. Chairman Bilirakis, Ranking Member Schakowsky,
thank you for the opportunity to testify today. I am a senior
fellow at Yale Law School's Paul Tsai China Center and at New
America. I am also a senior fellow for China with the Cross
Border Data Forum. And I advise U.S. corporate clients on
China's technology policies. I have been an analyst and a
linguist focused on Chinese data and cybersecurity policies for
over a decade.
While my expertise focuses on China, my view is that the
most effective solution for strengthening U.S. competitiveness
and leadership in governing emerging technologies requires an
approach that is more comprehensive than our response to any
single country.
Passing Federal privacy law that addresses how all
companies collect, transfer, and process data will enhance
competition while also addressing harms regardless of where
that risk originates. U.S. lawmakers have an opportunity here
to both address transnational threats while also advancing a
more secure, ethical, and democratic global internet in its own
right.
The Chinese leadership has embarked on an ambitious
national data strategy with the goal of acquiring, collecting,
and extracting value from large volumes of data. My written
testimony provides more details on this issue. Beijing could
use data collected and aggregated from overseas to build
profiles of individuals with national security clearances or
those with access to critical infrastructure, enabling the
manipulation, coercion, and blackmail.
Now, for most Americans this is probably not going to be a
top concern. But I do think that the impact on economic
competition and U.S. global leadership in emerging technologies
may be far more reaching. Access to data collected abroad
provides Chinese companies insights into population and
consumer behavior, risk tolerance, and other preferences. This
helps to strengthen the competitiveness of Chinese firms by
enabling them to develop products and services that are better
tailored to markets beyond China. And it enhances the ability
of those firms to then compete with U.S. companies. I am
talking about markets beyond the United States or China, as
both Beijing and Washington increasingly look to decouple from
one another's markets.
The most significant step that U.S. lawmakers can take to
strengthen U.S. global competitiveness, while also enhancing
consumer privacy and addressing these pressing national
security risks, is to pass comprehensive Federal privacy law.
The goal is to address all harms related to data processing and
to focus on securing the data itself, rather than a country of
origin or any single company. Inaction by the United States
means ceding leadership to Europe and to China in setting these
global norms and standards.
In addition, the United States should work with like-minded
governments to develop a common set of standards that would
allow data to flow. I would like to note the potential for the
Global Cross Border Privacy Rules, a data transfer alliance
that requires companies to certify to common standards for
privacy protection while enabling cross-border transfers for
those certified companies.
What this does is it creates a coalition of allies that are
sharing data with the United States. The ability of U.S. firms
to maintain high rates of innovation depends on access to
global markets, to international data sets, and to talent. If
U.S. firms cannot send data out of countries in which they
operate overseas, this directly impacts economic growth and
innovation and AI that is core to building applications that
work across a variety of demographics.
I urge U.S. lawmakers to address national security risks
and protect Americans' privacy by putting forward an
affirmative vision for U.S. data governance. ADPPA marks an
important step in this regard that merits further attention and
discussion. Inaction will only make the United States less
secure, less prosperous, less powerful, while allowing more
space around the world for the CCP to set the rules and norms
for technologies that will shape the future.
Thank you.
[The prepared statement of Ms. Sacks follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Bilirakis. I appreciate it very much. Next is Mr. Pugh.
You are recognized for 5 minutes, sir. Thank you.
STATEMENT OF BRANDON J. PUGH
Mr. Pugh. Chairman Bilirakis, Ranking Member Schakowsky,
and members of the subcommittee, thank you for considering my
testimony and for the invitation to speak at the hearing.
Let me begin by thanking the subcommittee and the members
of the entire Energy and Commerce Committee for the time
dedicated to developing comprehensive Federal data privacy and
security legislation last Congress.
We focus on finding consensus on a comprehensive Federal
data privacy and security law in the United States. One key
aspect of our ongoing work is the intersection of privacy and
security, including how national security and data security
should be key drivers in passing a Federal law. Data privacy
and security are vital to both consumers and industry. However,
such a law is vital to national security. This often under-
appreciated aspect is the focus of my testimony. Given the
topic of today's hearing, I will focus my analysis on China.
In 2020, the China Task Force found that the Communist
Chinese Party has a record of using official government
resources and companies with CCP affiliations to compromise the
data of people around the world, and that the United States and
its allies need to join the effort to secure data from the CCP
surveillance state and other malign entities.
These concerns are especially prevalent in China itself,
where advanced technology is used to track and monitor their
citizens with few, if any, protections. I wish I could say that
the concerns raised in 2020 are no longer valid. In fact, it is
the opposite: They are worse.
Data can reveal everything from your shopping habits to
sensitive parts of your life, like your health and location.
This, in the hands of the adversary or malicious actor, can
have devastating consequences, especially for vulnerable
populations. As one recent example in the Russia-Ukraine War,
data can even be amassed to target disinformation campaigns or
direct even physical violence toward those in conflict. This is
certainly not an isolated capability, and something that the
United States should worry about.
It goes without saying that the United States' rivalry with
China has taken on a digital nature. And China has been in a
race with us in terms of technology for years, from artificial
intelligence to military-specific technology. There are ways to
help mitigate and reduce these concerns, even though China's
collection and use of data will likely never end. A national
data privacy and security law--much like the American Data
Privacy and Protection Act, also known as ADPPA, last
Congress--is the most logical next step. I will explore three
main benefits, and how it could address the data collection
crisis that my written comments expand on.
First, acting on privacy legislation makes America more
competitive. Countries around the world have acted. Even China
has privacy laws. Unfortunately, those are more likely to be
disingenuous attempts by the Chinese Government to appear
concerned about privacy and security than genuine efforts to
promote privacy. This is especially true given the continued
surveillance abuses in China and the lack of security for even
Chinese citizens' data.
Nevertheless, the United States still lacks a comprehensive
privacy law and is becoming an outlier, especially as a country
that leads in trade and is looked to as a norm setter. This has
led to companies both American and global adopting other
frameworks as the default. The lack of a privacy law also does
not obligate most foreign companies to follow specific privacy
or security rules while operating in the United States.
Congress has the opportunity to change this by enacting a law
and clearly conveying the United States' position.
Second, many aspects of ADPPA would help mitigate data
privacy and security threats. For example, ADPPA contained data
minimization principles, which means data should only be
collected to the extent it is necessary or proportionate to
provide a product or service. In addition to the value this
adds to Americans individually in terms of privacy, it helps
reduce the amount of data collected and available in the first
place.
Other beneficial provisions include a requirement for
privacy policies to alert individuals that their data is
transferred to select countries like China, and establishing
strong data security standards. Preemption is also a beneficial
aspect because it creates one standard which would allow for
threats from adversaries and bad actors to be dealt with
consistently.
Third, data privacy and security legislation has broader
impacts. TikTok has continued to raise concerns on a bipartisan
basis. Several options exist to address TikTok. But regardless
of the path chosen, it is only a partial solution.
First, TikTok is just one application from one country. Not
only are there risks from other adversarial countries, there
are also other current and future applications that will pose
risks.
Second, many software and hardware products that pose risks
like connected devices. While a Federal data privacy and
security law might not be the full solution to those concerns,
it would serve as a way to help reduce what information can be
collected, who to share it with, require security, and provide
for enforcement, should it be violated.
Failing to act on Federal legislation would ignore the
broader risks posed by data, and leave threats from China and
other malicious actors unmitigated.
The United States may lag behind other countries by not
having a Federal data privacy and security law, but the 118th
Congress has the opportunity to chart a path forward.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Pugh follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Bilirakis. Thank you very much for moving along nicely.
I want to thank you for your testimony. I appreciate all the
witnesses. We will now move to the question-and-answer portion
of the hearing.
I will begin the questioning and recognize myself for 5
minutes. I would like to start with Mr. Farrah.
Congrats again on your new role with AVIA. I hope the broad
coalition you have assembled demonstrates the imperative of
breaking the deadlock on this lifesaving technology.
To me, the mobility benefits are very important. I was
disappointed that last Congress my amendment was blocked from
being considered that--it focused specifically on providing a
path for AVs to serve those living with disabilities, such as
the visually impaired.
I also wanted to recognize John Pare--if you could raise
your hand, sir, I would appreciate that--who is with us today
from the National Federation of the Blind. Thank you. Welcome,
sir.
He and NFB have been tremendous advocates for the living--
those living with disabilities, as well as the great benefits
that self-driving cars will have--a mode of mobility for the
community. So very important. I can tell you that we need them
in my congressional district, that is for sure.
I would like to request unanimous consent to enter into the
record the amendment and the letter from NFB in support of the
amendment I have submitted.
Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Bilirakis. Mr. Farrah, can you elaborate on the ability
for China to turn the dials up on testing these technologies in
contrast with what we have faced here in the United States?
It seems like the CCP can just flip a switch, tell a
province they are going to clear it for full AV testing, and
race past the U.S., while we delay and argue over small
political differences and regulatory approach. If you could,
address that.
And how can we instead show the world that America's
approach is superior by unleashing American innovation,
American innovators such as those flourishing in my home State
of Florida and across the United States, please?
Mr. Farrah. Mr. Bilirakis, thank you very much. Mr.
Bilirakis, thank you very much for the question, and thank you
very much for highlighting the role that John and the National
Federation for the Blind play. I think that mobility for
individuals that have physical disadvantages is a key aspect of
what it is that our industry is trying to achieve. And I have
been fortunate to work closely with John and his organization
and hear him talk passionately about the level of independence
that AVs would deliver to individuals within his organization.
Relative to your question, sir, I think it is important to
note here that we obviously have incredibly different systems
from the People's Republic of China in the United States. And
while I think it is important to look at China as an important
example of a country that has aims to be a leader on autonomous
vehicles, by no means do we need to replicate what it is that
they are doing in their country.
We, obviously, have been successful in being global
innovation leaders for decades in the United States, and we
have our own American brand of innovation. And so I think that
you all shining a light on this problem is very important, but
we also need to make sure we solve this in an American way.
I think that one thing that I do elaborate on in my written
testimony is the need for a Federal legislative framework. This
is something where we are very eager to work with members of
this committee to determine your priorities, but also to do
things like address the exemption caps for novel vehicles,
address issues with the FAST Act, address issues with the
``make inoperative'' provision, also look at a lot of NHTSA
rulemakings that are going on. And so these are things we are
very eager to do, and thank you again for the leadership.
Mr. Bilirakis. I appreciate it very much. Thank you. I want
to get to Ms. Sacks.
You have just heard my concern, of course, Ms. Sacks, about
how China can decide the future of this technology, God forbid.
Can you provide some more color and analysis for what happens
when we fall behind on technology like this, and what it means
to American jobs and supply chains?
This seems to--you know, this--we don't want it to happen
again, what happened with Huawei. So if you could expand on
your testimony, we would appreciate it very much. And I guess
you have got about 35 seconds.
Ms. Sacks. America should lean into our own strengths and
having open markets, free expression, and use those strengths
to target investments, incentivize R&D in these areas, as well
as the governance structures of those. And I am happy to
provide more color in written form, because I recognize that we
are close on time.
Mr. Bilirakis. I now will go to Ms. Schakowsky for her 5
minutes of testimony--excuse me--questions. But it could be
testimony, if you like. It is your 5 minutes.
Ms. Schakowsky. So I am so happy to hear the broad
discussions about data privacy. And it has certainly helped us
in the past with American competitiveness, globally. But for
decades, America--while America did lead the world in
technological innovation, we are now seeing that there are
threats by our lack of the--of a comprehensive privacy piece of
legislation.
So, according to the first page of Ms. Sacks' written
testimony, you had a passage about--let's see--about passing--
about the importance of passing a comprehensive Federal privacy
legislation. And I would just like to--I think, Mr. Pugh, you
commented on that.
But I would also ask Mr. Farrah and Mr.--I am sorry,
pronouncing your name--what do you feel about the--about
privacy legislation and its importance in the conversation that
we are having today?
Mr. Farrah.
Mr. Farrah. Thank you very much for the question. I think
that privacy is, obviously, incredibly, incredibly important.
Our industry does not have a position on the previous
legislation, but insofar as this subcommittee is active in that
regard this Congress, we would be eager to work with you and
share our views.
Ms. Schakowsky. As we move forward on autonomous vehicles,
I think privacy is going to be a big issue.
Yes, sir.
Mr. Pugh. I would agree that a rational, comprehensive
approach to privacy is important. Invasions of privacy have
real significance for individuals and households in the U.S. I
think that is one of the reasons why the FTC is currently
considering rulemaking with respect to online privacy. And I
think, as other testimonies make clear--and I think it is
pretty well known--that differential access to data within our
economy and compared, say, to the Chinese economy has
competitive significance, as well. So I think legislation that
addresses issues of privacy thoroughly and comprehensively
could be incredibly valuable.
Ms. Schakowsky. And I think on this subcommittee we are so
proud that we were able to get almost unanimous support on both
sides of the aisle to pass it out of committee. And now we just
have to go the next step.
Ms. Sacks, I wanted to ask you--and I think we--and I want
to hear more from Mr. Pugh, but--on the issue of minimization,
and why that is so important in your presentation.
Ms. Sacks. Thank you. You know, I am not a privacy law
expert, so I will defer to others on how specifically to think
about that issue. But what I will say is that it is important
to keep in mind a balance between two important areas.
One is that the data collected and retained and not secured
properly will be vulnerable to all bad actors, whether you are
talking about a sophisticated state actor, a data broker, or
those that are transferring it openly on the commercial market.
You know, Equifax's security flaws were well documented, even
though you had a sophisticated hack from China.
At the same time, we also have to keep in mind the balance,
right? Because as I mentioned in my testimony, AI depends on
access to quality and quantity of data, and U.S. firms need
access to that in order to innovate in AI. So certain things
like a flashlight app, does it need to collect location data? I
would say probably not. And so there need to be guardrails
around--the purpose that that data is collected.
In other areas, we need to make sure that we are not being
overly restrictive because of the need for AI to use quality
and quantity of data. So how do we strike that balance? I think
that is an area that very much merits deeper discussion.
Ms. Schakowsky. Thank you.
Mr. Pugh, did you want to comment on that, on the
minimization issue?
Mr. Pugh. Yes, I would be happy to. So data minimization is
one of the key reasons why ADPPA or whatever future bill it may
be is essential to national security. We are essentially
limiting the data that is available in the first place to--as
we just heard, we don't want to make it too constrained that we
don't have the data necessarily for technology, but making sure
we only have the data that is necessary and proportionate,
using the bill's language, is so critical, and it helps
minimize what could potentially fall in the hands of the
Chinese Government.
Ms. Schakowsky. Mr. Pugh, your testimony mentioned reports
of baby cameras spying on children. And I wondered if you would
comment on that, there right now is no Federal law that would
stop that, even China doing that. And, you know, I think those
of us who are parents here and around the country would be very
concerned about protecting that data. Did you want to comment
on that?
Mr. Pugh. I would be happy to. I think, to your example,
Congresswoman, that is a--baby camera spying on babies is
definitely a real possibility.
We also see vacuum cleaners mapping out homes. I think
those are real concerns that we need to address. And it really
ties into the benefits of IoT, or Internet of Things, but also
some of the risks.
Mr. Bilirakis. Thank you.
Ms. Schakowsky. My time is up, and I thank you.
Mr. Bilirakis. I appreciate it very much. Now I will
recognize the chair of the full committee, Mrs. Rodgers, for
her 5 minutes.
Mrs. Rodgers. Thank you, Mr. Chairman.
Last year Congress passed legislation to encourage the
building of semiconductor chips in the United States. I believe
Mr. Pallone references this legislation. And without a doubt,
it is critical that we are manufacturing semiconductor chips in
the United States.
I just wanted to let people know that I raised with
Secretary Raimondo, legislators, and manufacturers themselves
that we should be pairing permitting reform with any Federal
subsidies to semiconductor manufacturers. Unfortunately, that
seemed to fall deaf--on deaf ears. They--really interested in
the money.
So now we have manufacturers that are coming to us looking
for exemptions from NEPA because the Federal dollars are
triggering long and erroneous environmental reviews for them.
Now, I wish that they would have been open to those concerns
before the legislation passed. So now the largest manufacturers
may receive exemptions from the President. I am not so sure
about the startups or others across this Nation, and it just
highlights the importance.
And I wanted to add to the record without--add to the
record an article on Intel's horrible quarter revealed an
inventory glut and underused factories.
Mr. Bilirakis. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mrs. Rodgers. So, you know, we--I agree that the NEPA
process needs serious reforms, and I hope that the
Semiconductor Manufacturers Administration and members of this
committee will work with us on bringing commonsense reforms to
NEPA so that we can get America back into the business of
building things.
The number one barrier to building anything in the United
States is the permitting processes. It is the number one
barrier to manufacturing, building, doing anything in the
United States. So we are going to go to work on that too.
Back to privacy. Back to privacy and the importance of a
national data security law. And as has been referenced, we
passed the bill out of committee last year, with ADPPA. I
believe this is foundational. This is foundational for our
global leadership and securing personal information for every
American, especially from foreign threats.
So to Ms. Sacks, we know that China has stolen our data,
and we know that they are not going to stop. So how do you--
would you speak to ADPPA in protecting us from future threats,
while also promoting new technologies?
Ms. Sacks. The goal that I think this bill achieves is that
it both manages to address the transnational threat, a range of
bad actors, but also protects consumers and secures that data
here at home.
You know, I have--traditionally, I think that it is not a
good idea to look at domestic issues always through a China/
national-security-threat lens. And I think skeptics might raise
that question. This is a position, however, that I have long
advocated, which is if we want to both address bad foreign
actors and better enhance privacy protections at home, this is
the baseline that we need to do it.
And in terms of fostering innovation, as I have mentioned,
U.S. firms need access to global data flows. But how do we do
that in a safe, secure, and ethical way? We establish high
baselines of--around how the data is collected and transferred
and retained. And that is the balance that I think U.S. Federal
privacy law needs to strike.
Mrs. Rodgers. Thank you. I wanted to--I referenced the
legislation, the America COMPETES Act, that I had worked on in
the 116th Congress, and it really was asking--requiring the
Department of Commerce to drill down on emerging technologies
and give us some recommendations on how we make sure that we
are leading on AI, as well as others. Would you--we are still
waiting on those recommendations, but would you just speak to
what you believe we need to be doing to safeguard our data,
while finding a balance to lead on AI?
Ms. Sacks. You know, I think here we play offense and we
play defense.
From an offensive perspective, we probably should not think
about any single country, but how do we invest and incentivize
innovation at home, with a focus on digital infrastructure,
fiber optic networks? How do we create better space for U.S.
firms to compete overseas?
And cooperation with allies and partners. The EU-U.S. Tech
and Trade Council is one area. Working with Japan is another.
I think it is also important to take what has been referred
to as a small-yard/high-fence approach. Let's be selective
about what we are protecting. Not everything is a national
security issue, and in fact, with AI sometimes there is a
symbiotic relationship, and it is hard to prevent code from
crossing borders. So let's be smart, and use a risk-based
approach.
Mrs. Rodgers. Mr. Farrah, I understand you worked for the
National Venture Capital Association. I would love to talk to
you further and hear more about how you believe the regulatory
framework is impacting our market leadership. So anyway, but I
ran out of time.
I will yield back.
Mr. Bilirakis. I thank the chair, and I will recognize the
ranking member of the full committee, Mr. Pallone, for 5
minutes.
Mr. Pallone. Thank you, Chairman. I want to echo the
sentiments of Ranking Member Schakowsky about the need to enact
the American Data Privacy and Protection Act, which, of course,
is bipartisan with Chairwoman Rodgers and myself.
But I also--I am concerned about, as I said in my opening,
what the Republican leadership is planning on with regard to
the debt ceiling. You know, they have threatened to leverage
the debt limit to enact crippling budget cuts to bedrock
American programs.
Experts have warned that defaulting on our Nation's debt
obligations--a debt that was amassed during both Democratic and
Republican Congresses--could wreak havoc on our financial
markets, potentially causing the stock market to plummet and
capital markets to freeze.
So let me start with Mr. Jarsulic.
How would defaulting on our national debt affect American
competitiveness?
Mr. Jarsulic. So, I think that it is pretty well recognized
on the basis of the previous incidents in 2011, 2013, where we
came close to hit a debt limit, that the economic consequences
can be relatively severe. I think we can expect upward spikes
in Treasury rates if the default process went on long enough.
There would be a translation of that, those interest rate
increases, into mortgages, into consumer credit cost, because
those interest rates are based off Treasury rates.
I think we could expect equity market declines. I think we
can expect hits to consumer confidence, all of which--demand,
slow the economy at a moment when people have concerns about
tipping into a recession. That creates a big risk.
In the slightly longer term, repeated run-ups to debt
limits and potential of default has already had an effect on
the way that the world views Treasury securities. S&P
downgraded us from the highest possible rating for sovereign
debt, and that downgrade has persisted. If we go through
another incident--instance where we actually hit the limit, I
think that there is a possibility that, in the long term,
foreign investors in Treasury securities will re-evaluate the
risk, and they will demand more of a risk premium in order to
[inaudible].
So I think that the aggregate demand effects, the long-term
cost effects of a default, are really quite significant.
Mr. Pallone. Well, thank you. Let me ask Mr. Farrah. Your
testimony states that we must have a strong capital market to
``continue to lead on AV development and deployment.'' Now, how
would defaulting on a national debt and destabilizing the
financial sector affect your members' ability to develop and
deploy AVs?
Mr. Farrah. Ranking Member Pallone, thank you very much for
the question.
As I write, the capital markets are incredibly important
because we have both innovative startup companies that are
trying to deploy autonomous technology. We also have larger
companies with experience scaling in the transportation sector
that are financing a lot of the research that I mentioned and
testing that is going on. And so certainly, this is something
that is very important to the health of our industry so that we
can bring the promise of AVs to your constituents.
That said, we do not have a position as an industry on the
default that you mentioned.
Mr. Pallone. But your testimony also provides several
recommendations from DOT that could--that they could adopt to
support the deployment of AVs. Would the DOT be better
positioned to carry out these recommendations if their budget
is dramatically cut?
Mr. Farrah. The Department of Transportation is a very
important partner to us, obviously. That is something that we
very much value--the collaboration. We have recommendations
that we have put forward to DOT in terms of doing things like
updating the Federal Motor Vehicle Safety Standards, and that
is an ongoing conversation.
In terms of overall funding levels, that is something--we,
obviously, defer to Congress and your judgment as to what those
funding levels might be.
Mr. Pallone. All right.
And, Mr. Jarsulic, how would stringent budget cuts affect
our Nation's ability to compete?
Mr. Jarsulic. So really large budget cuts probably will
affect the ability of the Federal Government to provide things
that are important for the normal functioning of the economy.
The Federal expenditure supports healthcare, supports
infrastructure, supports scientific research and development.
And if those things are compromised, the functioning of the
economy is clearly going to be affected.
In addition, large cuts in expenditures will create an
immediate shock to demand, and that can have important
employment and--effects, as well.
Mr. Pallone. Thank you.
Thank you, Mr. Chairman.
Mr. Walberg [presiding]. I thank the ranking member, and
now I recognize the gentleman from Indiana, Mr. Bucshon.
Mr. Bucshon. Thank you, Mr. Chairman. I want to
congratulate Mr. Jarsulic for sticking to his talking points on
the debt ceiling to help out Chairman Pallone on that
narrative. But the reality is we have never defaulted, and it
always gets raised.
The other thing I want to point out is that the CHIPS Act
was included in a larger bill. We all know this, right? It had
many, many policies the Republicans just couldn't support. And,
you know, it is disingenuous to say we didn't support the
concept. Look, I understand the politics, and this probably
won't be the last time we hear that narrative as it goes along
this year.
That said, thanks, Chairman Bilirakis, for calling today's
important hearing. Ensuring American businesses and innovators
can keep our competitive edge against China is an extremely
important issue, and we must facilitate U.S. leadership in new
technologies and ideas.
One industry in which the U.S. has been a leader but is in
danger of being passed internationally, particularly by China,
is that of autonomous vehicles. I strongly believe in the
potential of this technology. Last Congress, I co-led
legislation to study crash avoidance systems to help make AVs
safer for all road users, and I led a letter asking NHTSA to
update safety standards for AVs, and continue to advocate--
continue advocating for a national regulatory framework for
AVs.
So, Ms. Sacks, I have a question for you. I foresee a world
in which the Federal Government may eventually procure AVs for
certain types of vehicle fleets, and want to be certain that,
if that happens, those vehicle fleets are protected from
Chinese data collection and storage. Do you have any
recommendations on how we could prevent technological
vulnerabilities in such AVs or in AVs in general?
Ms. Sacks. I will defer to my colleague, who is an AV
expert, but I can speak to the broader question of how we
protect the broader tech stack, and I think this is an area
that is bigger than China, right? There are best practices for
accessing--for assuring hardware security in products,
regardless of whether you are talking about a counterfeit,
whether you are talking about a component that is made in
China. And the same goes for building cybersecurity at the
software level, where the U.S. Government does have standards
around that.
So again, I would encourage the committee to think about
this in--bigger than any single country, and we need to also
invest and incentivize it ourselves, and play to our own
strengths. But I defer to my AV expert colleague for specific--
--
Mr. Bucshon. Yes, I just want to agree with you real
quickly--and then we will go on to Mr. Farrah--about not a
single-country strategy. We want America to be competitive
against our competitors, some of which don't like us and many
of which do.
So, Mr. Farrah, do you want to comment on the AV--the
cybersecurity and hardware security in AVs?
Mr. Farrah. I would like to. But first, sir, I would like
to thank you for your leadership on autonomous vehicles in
previous Congresses, and look forward to the conversation
continuing.
I think, from our perspective, cybersecurity is very
important. Obviously, our industry is very motivated to make
sure that the vehicles are kept safe, that those riding in the
vehicles are also kept safe.
And so this is something where there are obviously cyber
threats out there. We support a risk-based approach where we
can take a comprehensive view and look at how it is that we can
best protect American equities. This is something where,
obviously, the AV industry would like to be at the table on
that. But at the same time, we are not different in many
respects. I think there are many in the automotive sector, the
technology sector that need to be at the table so we can kind
of get a comprehensive approach.
Mr. Bucshon. Yes, and I would say in the AV space, you
know, it is not just foreign actors, that, you know,
cybersecurity is critically important because if you just have
somebody stand on the side of the road and--hacks into
someone's--an AV and diverts it off the road, you know, that is
a problem. So this is--you know, this is an issue that we will
have to address.
Another possible area where I have some concern is the
CCP's improperly accessing America's data through the CCP's new
Blockchain-based Service Network, or BSN. BSN has been
advertised as a one-stop shop blockchain foundation which
others can easily build on top of. While the last few years
have shown how prevalent scams and frauds are in NFTs and other
blockchain applications, something our committee must work to
address, we cannot allow the CCP or other actors or anyone else
to corrupt America's infrastructure once again.
So Ms. Sacks, you have written a lot about protecting
America's privacy information from the CCP. What dangers do you
see in adopting a CCC-created foundation for blockchains? And
can we secure America's information if we allow other actors'
components into our tech stack?
And we only have a few seconds, so----
Ms. Sacks. I would be happy to submit some more----
Mr. Bucshon. That would be great. Thank you very much.
Mr. Walberg. I thank the gentleman for yielding, and now I
recognize the gentlelady from Florida, Representative Castor.
Ms. Castor. Thank you, Mr. Chairman. And thanks to our
witnesses for your testimony today, and welcome to the new
members.
And I do want to say at the outset here at our first
hearing it is especially important for this subcommittee to get
to work on comprehensive privacy protections sooner rather than
later. And I hope this will include the long-overdue
protections for children and teens online. Their safety is at
risk. They are being constantly surveilled and targeted with
ads. It is weighing on them, in addition to all of the
fundamental security issues that put them at risk.
But I want to talk a little bit about AVs--EVs, because we
are also suffering the costly impacts of the climate crisis. It
is--those costs are weighing on our neighbors back home, on
farmers, on the Federal budget as extreme events continue to
escalate.
But it also provides an important opportunity. The race for
cleaner, cheaper energy provides opportunities for American
workers and American businesses. The transportation sector is
the largest source of greenhouse gas pollution in the United
States.
But--and I know Representative Dingell will agree with me
that electric cars and trucks offer an innovative solution. We
want American companies and workers to win the race for the
future, but we are behind right now. That is one of the reasons
that we devoted so much attention to--in the Inflation
Reduction Act--new incentives for American-built cars and
trucks, electric vehicles, and the Bipartisan Infrastructure
Law. We dedicated about $7.5 billion for electric vehicle
chargers.
So, Mr. Farrah, how do you see that investment going so far
for the electric vehicle charging across America, and what are
your hopes in that area?
Mr. Farrah. Thank you very much for the question. I would
just note that Florida has been a leader nationwide on AV
deployment, and that is something I would love to discuss in
greater detail with you.
Relevant to the Inflation Reduction Act, that is something
that--our organization was not involved in that legislation,
does not have a position specifically on the bill.
I will say, however, that if you look out at the landscape
of autonomous vehicles, many of them are electric vehicles, and
that is something that will hopefully lead to a generational
shift towards electric vehicles. We think we can be of
assistance in that regard.
Ms. Castor. Are you plugged in to the charging
infrastructure, the planning that is going on at DOT and at the
State level?
Mr. Farrah. We can give you an industrywide view of that,
to what degree we are plugged in to that. And that is something
that I think we value sharing the perspective.
But the final point I would just make is that, even for
those AVs that are not electric vehicles, you also have a
number of environmental benefits in terms of smoother driving,
less idling, the ability to operate at night, and things of
that sort.
Ms. Castor. Well, we have some challenges, because in 2018
Chinese production accounted for more than half of all lithium
battery cell manufacturing capacity and nearly half of all
global EV sales, while the United States, we were--EV sales are
just really starting to take off.
Congressional Democrats and the Biden administration have
really focused on this. And the Inflation Reduction Act is
going to provide that relief and those incentives to consumers,
and then to the manufacturers, and to the workers.
Mr. Jarsulic, why is it important for the United States to
lead the world when it comes to electric vehicles' design,
production, and deployment?
Mr. Jarsulic. You know, I think it is pretty clear that
because of the risk created by carbon emissions, the world is
going to move away from internal combustion engines in autos,
trucks, busses. And if our auto companies are going to remain
competitive, they are going to have to produce EVs.
There's a lot of employment and output associated with
this. The auto industry comprises about 3 percent of GDP. And
if the U.S. successfully transitions to the manufacturing of
EVs, that kind of employment and income doesn't vanish.
I think it is also important to remember that new
techniques are being developed in the production of EVs. And if
you want to learn techniques in manufacturing, you have to
engage in learning by doing. So the sooner we can make the
transition to producing EVs at scale, the sooner our
manufacturers can join in that process of learning by doing,
and push the frontier forward, and improve their competitive
condition.
Ms. Castor. We want to win the future. We want to build
those EVs in America and supply them to the world, and at the
same time create millions of good-paying jobs all across the
supply chain. So thank you.
I will yield back.
Mr. Walberg. I thank the gentlelady, and I certainly agree.
We want to lead the world.
I also want to make sure that it is clear that, as our
chair indicated, Republicans on this committee are fully
committed to passing a comprehensive Federal privacy and data
security standard. We are committed to that.
Let me also state before I recognize myself for my 5
minutes that--just to make it clear, and as respectfully as I
can--Democrats are the only ones anywhere talking about cuts to
Social Security or Medicare or defaulting on the debt. That is
clear, what has been stated.
Let me go to my 5 minutes of questioning, and thank you to
the panel for being here.
China is actively using U.S. customer data to better
develop their artificial intelligence, whether through mining
and scraping purchasing data or third parties, or through apps
like TikTok sharing information with the Chinese Communist
Party.
Mr. Pugh, at a time when Republicans and Democrats agree
that AI is a national security economic imperative, shouldn't
we be more cognizant of the amount of data we are making
available to our adversaries?
And secondly, what steps can we take to prevent U.S. data
from being accessed by the CCP?
Mr. Pugh. Well, thank you, Congressman. So data in itself
is essential. We need it for our economy and we need it for
innovation.
To your point, the issue is when it falls in the hands of
adversary nations and malicious actors, which we see happening
on a second-by-second basis with China, unfortunately. And that
is something that I really implore this Congress to address.
And I think the best way to do that is by acting on a
comprehensive data privacy and security law today.
Why it would benefit consumers and industry? The security
nexus cannot be under--you know, overstated. And what I mean by
that is just one aspect. This contains data security
provisions. It would require data to be safeguarded. And if
that actor chose not to follow that, then there could be
enforcement as a result.
Mr. Walberg. OK. Thank you.
Michigan, my State, is the Motor State. Representative
Dingell and I would certainly agree strongly on that. It is the
Motor State, and I want it to stay that way--and expand, in
fact. But China continues to push forward on autonomous vehicle
development and deployment. I think a roadblock to U.S.
leadership in this space is consumer comfort, consumer comfort
with the whole issue.
I myself have expressed concerns about how autonomous
vehicles handle the safety of pedestrians, motorcycles. I am a
motorcyclist. I am very concerned that we do this right, and
more.
Mr. Farrah, I noticed you didn't use ``self-driving,'' and
I thank you. I thank you because there is an auto company, at
least one, that has used that, sold cars on it, and they don't
self-drive. Driver-assisted, all of that, we are there, and it
is working well in most cases. And I think we ought to hold off
on using that term, ``self driving,'' for a while until we get
it right.
How are your members approaching public education about the
safety of autonomous vehicles so that the United States can
continue to lead on this important technology?
Mr. Farrah. Thank you very much, Congressman. I appreciate
the question. And thank you for your previous leadership on the
SELF DRIVE Act and the dialogue we have had around some of your
safety concerns.
Mr. Walberg. And I hated that title.
Mr. Farrah. I should note at the outset, though, that we
acknowledge that public consideration of autonomous vehicles is
very important, and our industry is doing a considerable amount
to get out and talk to the American public because your
constituents are going to increasingly be seeing these vehicles
on the roads, whether they are delivering groceries, taking
them to destinations, trucks driving on the highway. It is
important that people understand why these are safer than the
alternative. So that is something that we take seriously. We
have a number of initiatives that we can talk about in further
detail.
I think one issue that I want to address, though, that you
got at here is a lot of the confusion around driver-assist
technology, as compared to autonomous vehicles.
Mr. Walberg. Autonomous.
Mr. Farrah. That is something that is absolutely critical,
that people who are in the vehicle understand what they need to
be doing. If they are required to perform any aspect of the
driving task, they are in a driver-assist vehicle.
Secretary Buttigieg said it very clearly: ``If you can buy
it in the showroom today, it is not an autonomous vehicle.''
That is important. Our industry is very clear in the language
that we use, and we appreciate your attention.
Mr. Walberg. And it will give much more comfort as we keep
that clear. So thank you.
Today we have smart phones, smart light bulbs,
refrigerators, everything. Though these sensors are working to
a great degree, we still have challenges. While the United
States has been taking steps to remove Huawei and secure our
networks that are involved with many of these things, Tuya has
slid under the radar.
I have an article by Klon Kitchen and Hal Brands which
outlines the dangers Tuya poses that I would like unanimous
consent to enter into the record.
Hearing none, it will be entered.
[The information appears at the conclusion of the hearing.]
Mr. Walberg. Mr. Pugh, how can we secure our network if the
smart devices we rely on are compromised by design?
Mr. Pugh. So, Congressman, you are right. This is a
critical issue. We rely on IoT devices on a daily basis, and
the number of devices by 2030 are supposed to be 29-plus
billion.
The issue is we don't have a baseline for our IoT devices.
So that is a great starting point, seeing--is there a baseline
that these device manufacturers should be meeting?
Secondly, making more of them in America. I have more faith
in American companies that do privacy- and security-enhancing
things than I do with a CCP-backed company.
Mr. Walberg. Thank you. I yield back.
I recognize now my good friend and colleague from Michigan,
Representative Dingell.
Mrs. Dingell. Thank you, Mr. Chairman. As my Democratic
colleagues have pointed out today, I do believe that we made
some steps in the last--Democrats made some progress in
enacting serious and significant legislation to strengthen our
competitive edge on the world stage. But we all know that there
is so much work we need to do to solidify our long-term
economic might and define our national competitive advantage
with countries like China.
I associate myself with many of the comments that have been
already made, and I am very grateful to hear so many people
talk about autonomous vehicles and the need to do something,
because we don't always hear that.
Electric vehicles are also critical in all of this and
further mitigating risks from U.S. supply chains in bringing
them back, and I have 5 minutes and could talk for 5 hours or
more. But let me move to AVs quickly.
Cutting-edge technologies like autonomous vehicles hold the
promise of improving safety, expanding mobility, and
strengthening our economy. At the moment--and it is only at the
moment, as you and I know--we hold a competitive edge in
developing and deploying AVs. According to KPMG, the United
States ranks higher in preparedness for AVs than Japan,
Germany, and China.
But here is the reality: We have got to preserve and expand
this advantage by ensuring that the United States, not
countries like China, write the rules of the road for this new
transformative technology. That is why I have spent years
collaborating with my colleagues and the stakeholders to
establish that national framework. I know that, under the
Republican leadership with my--we are going to get it done this
year, or this Congress. I guess I should be realistic.
But here is our truth: Autonomous vehicles are here, and
every day we do not have a Federal framework in place for the
safe deployment of AVs, we are risking falling behind the rest
of the world. China gets what is at stake. If the United States
is going to stay at the forefront of innovation in AV
technology, keep those jobs here in this country, not cede
leadership to any other country. We have got to get motivated
and act.
So, Mr. Farrah, how can lawmakers and regulators lay the
foundation for the continued development and deployment of AV
technology to ensure the future of this technology stays in the
United States?
Mr. Farrah. Representative Dingell, thank you very much.
And I share your passion for AVs, and specifically around the
safety and mobility benefits that we have spoken about in the
past. And so this is something that I think--we are talking
about, literally transforming how it is people and goods move
around this world, and that is tremendous.
And so we are very hopeful to work with this subcommittee
this Congress, hopefully this year, to pass AV legislation that
would set up that framework. There is also, frankly, work that
needs to be done at the agencies, as well, in terms of updating
a system that is many decades old.
In terms of legislation, there's a number of issues that I
detail in my written testimony. A few of them that are worth
flagging here is that we have an outdated process as it relates
to the exemptions process for so-called novel vehicles, where
you--this needs to be updated. This is something that the
committee has addressed before on a bipartisan basis.
We also need to make sure that certain rulemakings are
ultimately executed on and finished.
And so these are things where we are very committed to
doing this, and certainly appreciate the opportunity to work
with you and your team.
Mrs. Dingell. So I have a minute and 30, and I want to get
to supply chain. But could you very quickly tell the committee
how the absence of the Federal AV framework affected the
development--is affecting every single day the development, and
putting them on the road, of autonomous vehicles?
Mr. Farrah. Absolutely. I would make two quick points.
I think the first one is that--and I mentioned before the
exemptions process. There are U.S. companies that want to be
manufacturing these vehicles. They want to be deploying these
vehicles. But right now they are limited under this exemptions
for novel vehicles to 2,500 vehicles per year for a maximum of
2 years. That is the wrong message for the Federal Government
to be sending to companies that want to be producing these
companies and ultimately benefiting the United States.
So that is something that I think needs to be addressed,
and it needs to be addressed very soon. And so that is
something that we can address in legislation, and I appreciate
your help.
Mrs. Dingell. Thank you.
Mr. Chairman, I am down to 33 seconds, sir. I am going to
want to put some questions in the record.
But I do want to focus on strengthening the U.S. supply
chains. I think most people don't realize how vulnerable we
left ourselves from both an economic and national security
issue until the COVID-19 public health crisis hit. And we saw
that the private sector alone cannot identify, monitor, and
address supply chain vulnerabilities.
You know, we are so dependent upon China for the electric
vehicles that you are talking about. Most people do not
understand. Lithium has gone up $1,500 in the last 6 months,
and a battery--EVs are--I mean, we got to develop our supply
here. We have got to work on that.
I am a proud author of the Supply Chain Security and
Resilience Act. I am going to ask you, Mr. Jarsulic, for the
record--and some other questions--what are some best practices
to help us improve our Nation's supply chain resilience.
I am over. You are going to have to write the answers to
this, what can--there's just so many issues that all of you can
answer.
This is the future of our country. Thank you. I yield back
the seconds I don't have.
Mr. Walberg. I thank the gentlelady.
[Audio malfunction.]
Mr. Walberg. This proves that--I don't know if somebody
else has a--yes, that would work better.
So thank you for yielding back. Now I recognize the
gentleman from South Carolina.
Mr. Duncan. Thank you. Thank you, Mr. Chairman. I wonder if
Michigan is the Mitten State or the Motor State. I am confused
on that, but----
Mr. Walberg. It is both.
Mr. Duncan. OK. I want to applaud what is going on in South
Carolina with BMW, Volvo, and Mercedes, and what they are doing
with the EVs, along with other vehicle manufacturing.
[Audio malfunction.]
Mr. Duncan. And I apologize for this sound.
But I want to remind my colleagues on the other side of the
aisle that we are $31 trillion in debt, and we are spending
money that is borrowed. I say that because what is the role of
government in subsidizing our funding these type of things? I
point to government spending on Cash for Clunkers. It was a
failed program at the initial--on the onset, the Obamacare
rollout, the problems that it had.
I believe in innovation at the private-sector level. I
think myself that we have more machinery of government than is
necessary, too many parasites living on the labor of the
industrious.
A government big enough to supply everything you need is
big enough to take everything you have. The course of history
shows that, as the government grows, liberty decreases. That
was a Founding Father, Thomas Jefferson, that quoted that.
Liberty is the liberty to innovate and invent, and
capitalize off the profits of that innovation.
I am fascinated with AVs. I think the appropriate initial
step is what I see happening in the trucking industry: point-
to-point delivery, oftimes at night, with commodities,
distribution center to distribution center, maybe local
carriers. I think that is a way we can prove that AV works, AV
is safe, and I would love to see the innovation within the
trucking industry as the future of AVs before we entrust that
to the populace to get in an AV that maybe is driverless--I
know we are not using that term--in the future. But I do see
that as the wave of the future, both in trucking and passenger
vehicles.
So I want to shift gears a little bit, and Ms. Sacks, while
the U.S. banned Huawei from building 5G infrastructure, Chinese
state-owned automotive companies like AutoX and Pony.ai
continue to operate pilot programs in the United States with
limited oversight. What types of information these companies
collect that could pose a national security risk if shared with
the foreign adversaries that could exploit such information?
Ms. Sacks. So AV companies collect, like, many different
kinds of data. And Mr. Farrah might be able to comment in more
depth on what that is. I am not familiar with these specific
companies.
I can say, more broadly, from understanding, you know, how
the industry works from a data security standpoint, I think
that there is not only potentially information about the
infrastructure, the mapping, but I would also sort of push back
and say, you know, are they collecting information about
mapping and streets that is any different from what you might
find on Google Maps or that is available openly?
So there are different kinds of data. And so one question
might be, what kinds of data are they collecting and what are
the--who has access to it? And I would ask that not just for
these particular companies of Chinese ownership but any AV
company more broadly, and what are the data security practices?
You know, the point that I have made in this hearing
repeatedly is that we should focus on--certain kinds of data
have different levels of sensitivity. Who has access to it, how
is that being secured, rather than necessarily looking at a
sort of country of origin or nationality when that data might
be openly available on the commercial market in other forms.
Mr. Duncan. Yes, I think that is strong.
I am not concerned about this, I am just stating this for
the record: Uber already has--if I use an Uber to go to
Walmart, they know how many times I went to Walmart or that I
ate fast food. Now, what--who collects that information, how it
is shared with others about my traveling habits, my shopping
habits, my eating habits? And I think that is a concern of many
Americans, what AVs will collect as you travel around.
Mr. Farrah, as a follow-up to that question, it has become
abundantly clear that Chinese-owned companies are testing the
U.S. and sending information they collect back home. However,
if an American company were to test their AVs in China, they
would not be able to send that information back home. Is that
correct?
Mr. Farrah. Thank you very much for the question.
First of all, I note--and thank you for the appreciation
for AV trucking, which is a very exciting trend line in our
industry.
I think that market access overseas is a big concern,
generally speaking, for our industry. We want to make sure
that, as these companies scale and grow, that they have access
to those markets. And so my understanding is that is a huge
consideration in a place like China, where we don't have that
same level of reciprocity, and I would certainly be happy to
dialogue with you and your team further about that.
Mr. Duncan. Absolutely. There's going to be a lot of
hearings on this type stuff, and I look forward to that
conversation.
And with that I yield back.
Mr. Bilirakis [presiding]. Thank you. Now the Chair
recognizes Representative Blunt Rochester for her 5 minutes.
Ms. Blunt Rochester. Thank you, Mr. Chairman, and
congratulations, as well. And thank you also to Representative
Kelly and to the witnesses.
I agree with my Republican colleagues that U.S. economic
competition is the issue of the moment. Businesses and working
people up and down my State of Delaware report severe supply
chain issues that hamper their businesses and livelihoods. U.S.
manufacturing has declined in recent decades, and with it so
has the resilience of critical supply chains. My colleagues
across the aisle are right: U.S. leadership over standards and
regulation are important.
But U.S. leadership is just a means, not an end in itself.
Ultimately, American families are counting on us to improve
their economic opportunities. Talk alone will not create good-
paying jobs that American families need. This moment demands
all of us come together in a comprehensive, credible, and
resourced strategy.
This week my colleagues and I will meet the moment by
introducing comprehensive legislation to build resilient supply
chains that ensure we can compete with China, Russia, or any
adversary that intends to undermine our economic and national
security.
I hope my Republican and Democratic colleagues will join me
on these bills. These measures invest in the central pillar of
the U.S. competitiveness by investing in critical supply
chains. They are also endorsed by over 150 businesses and trade
associations, including the Information Technology Industry
Council, Consumer Brands Association, National Association of
Manufacturers, and the Motor Equipment Manufacturers
Association.
Mr. Chairman, I ask unanimous consent to insert a letter
and its appendix into the record.
Mr. Bilirakis. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Ms. Blunt Rochester. This is a transformational policy. And
as we saw with ADPPA and with the CHIPS and Science Act, this
committee knows transformational policy is necessary to solve
the issues hindering economic growth.
Mr. Jarsulic, to reverse the declines in U.S.
manufacturing, should we take a whole-of-government and whole-
of-economy approach and incentivize reshoring of manufacturing?
And does that include investments in production practices and
workforce programs?
Mr. Jarsulic. As I indicated in my testimony,
competitiveness in manufacturing really is a source of
productivity growth, and productivity growth is necessary for
growth in wages and profits. We really need that.
And therefore, what you can do--what we can do through
policy to strengthen manufacturing and strengthen its
competitiveness has real economic importance.
I think that the elements that are in the three acts I
talked about, which are designed to overcome obstacles to
private investment and to productivity growth in important
areas ranging from semiconductors to biopharma, are going to
make an enormous contribution. But I think there is much more
that can be done.
People who look at advanced manufacturing recognize that,
in addition to large corporations who are making investments,
those corporations need to have the support of clusters of
small and medium-sized enterprises who provide inputs and
services to those corporations. And so work that can be done to
bring those SMEs to the technical frontier and allow them to
participate in advanced manufacturing is really important.
There is--a lot of that is embedded especially in the CHIPS
Act. More can be done.
Ms. Blunt Rochester. You mentioned the CHIPS Act and you
also mentioned the semiconductors. And I think that is an
example of us failing to evolve fast enough. Can you share with
us any examples of industries or products that are at risk of
falling behind unless we make these significant investments?
Mr. Jarsulic. Well, we have talked a lot about EVs here,
and I think it is very clear that some of the inputs necessary
for the expansion of that industry really need to be looked at
carefully. For example, batteries depend on certain kinds of
critical minerals: lithium, cobalt, nickel. And the supplies of
those materials are not necessarily available in ways that
could be secure or economically viable for us. For example, I
think--oh, sorry.
Ms. Blunt Rochester. Sorry, my time has expired. But I will
follow up with you, because I want to follow up on the issue of
not just the raw materials, but also there is a report from the
Center for Strategic and International Studies that speaks also
to our national security risk, as well, which I would also like
to enter into the record, Mr. Chairman.
Mr. Bilirakis. Very good.
Ms. Blunt Rochester. Thank you, and I yield back.
Mr. Bilirakis. Without objection, so ordered.\1\
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\1\ The Center for Strategic and International Studies report has
been retained in committee files and is available at https://
docs.house.gov/meetings/IF/IF17/20230201/115346/HHRG-118-IF17-20230201-
SD024.pdf.
---------------------------------------------------------------------------
Mr. Bilirakis. We have my good friend from the great State
of Florida, Mr. Dunn, please.
Dr. Dunn.
Mr. Dunn. Thank you. Thank you very much, Mr. Chair. It is
a great State too, by the way.
As we are all aware, in December the Chinese Communist
Party issued its 14th 5-year plan outlining China's ambitions
to become the global leader in the digital economy by 2025. In
order to protect our private data and independence from the
Chinese Communist Party, we have to focus on nearshoring and
friendshoring our supply chains in conjunction with fair trade
deals.
We have to expose the CCP's pattern of commercial
aggression against America and our allies. You know, examples
abounded during the pandemic of massive impact on supply
chains. But for example, in the medical world we imported
billions of dollars' worth of drugs and APIs from China
annually. And this dependance on China is a national security
concern.
I look forward to working with this committee and my
colleagues and my colleagues on the China Select Committee to
enact policies that will bring critical supply chains back to
the U.S. and to trusted allies to help free us all from
Dependance on China for critical commodities and
pharmaceuticals.
Mr. Pugh, first question. I agree with your statements that
data privacy and security are vital to consumers and industry.
Understanding that the CCP has repeatedly compromised our data
and that the ADPPA from the last Congress was a good first step
in combating this data gathering, can you please speak to the
seriousness of delaying that legislation?
Mr. Pugh. Well, thank you, Congressman. That is a
phenomenal point, and every day we wait--or every second we
wait, I should say--is just the more data that the Chinese
Government, the CCP, is collecting and potentially exploiting
against Americans.
I mean, we see their collection happening in the United
States, outside the United States but still directed at
Americans, and then we can't diminish the fact that they
continue to just steal and even sometimes buy it. And that can,
unfortunately, be used to target both intelligence
professionals, those in the military, children. So I think it
is just paramount that this is the key priority and is done
without delay.
Mr. Dunn. Are there specific progrowth policies you would
like to see from America?
Mr. Pugh. I think one of the best policies would be, first,
acting on the comprehensive data privacy and security law. And
I think one of the benefits of ADPPA was the intent of trying
to get at the fact that not all companies are the same, is that
we need to take into account that small and medium-sized
businesses have different needs and different capabilities than
our largest international players. Not to say they--they all
may not have privacy risks, but a mom-and-pop business on Main
Street cannot comply in the same way that--or no have the same
risk.
So I do think that is something that we should act on now,
a comprehensive law, and vary the--some of the provisions.
Mr. Dunn. Thank you for your reasonable approach to that.
Ms. Sacks, you commented on the importance of a
multicountry approach for creating a network of trusted trading
partners in which we lower barriers to trade in order to create
resilient, reliable allied supply chain. This makes so much
sense. Can you expand on that issue and perhaps say which
allies, which partners we should be working on first?
Ms. Sacks. Well, perhaps I will highlight a number of
initiatives that are underway which are really positive steps
in this direction.
So I mentioned Global CBPRs, which is an expansion of the
Asia Pacific-based framework. In addition, the OECD recently
issued a set of principles around government access to data
which would facilitate more data flows among OEC members, and
the Japanese Government under former Prime Minister Shinzo Abe
had put forward the data free flows with trust concept, which
again is this idea to encourage a coalition of allies and
partners to share data but with certain safeguards in place.
What does that look like and what does that mean in
practice is a question that I think experts are actively
debating. And this spring at the Hiroshima summit, my
understanding is there may be further movement there. So these
are all important initiatives, and definitely merit further
attention.
Mr. Dunn. Well, I--thank you for your words. And I will
tell you I sit on the economics committee of NATO as well as
these other things, and it is a common theme among our NATO
allies that--you know, to friendshore trade. And so I hope we
can find a way to work our way through these trade barriers
that we have erected to each other. And this is all--this is
like friendly fire when we are in NATO.
So thank you very much for--the entire panel, a very
erudite group.
I yield back.
Mr. Bilirakis. I appreciate it very much, Doctor. OK. Now
we will recognize Representative Kelly for her 5 minutes.
Ms. Kelly. Thank you, Mr. Chair, and thank you to the
witnesses.
During a time of crisis, the United States relies on its
manufacturing base to withstand economic disruptions and
respond to national emergencies. But the COVID-19 public health
crisis exposed, as you know, serious gaps in our critical
manufacturing supply chains that harmed our efforts to combat
COVID-19, crippling shortages of N95 masks, gowns, surgical
apparel, gloves, and testing supplies. The shortages were so
severe that nurses substituted trash bags for gowns, doctors
wore modified snorkels as masks, and essential medical
personnel reused single-use N95 masks for days on end.
These crippling shortages contributed to the spread of the
disease, causing preventable illnesses, hospitalizations, and
death. Our healthcare system neared overload. Our healthcare
heroes were placed under enormous strain. And the U.S. domestic
manufacturing base was incapable of meeting the surging demand
for critical healthcare equipment. Instead, hospitals and
consumers turned to overseas fly-by-night brokers and
opportunists selling standard PPE.
Last Congress, when the Democrats were in the majority, we
made meaningful strides to strengthen our global economic
landscape to ensure our competitors like China don't leave us
competitively disadvantaged. Just one example is the America
COMPETES Act, which would have invested 46 billion for a whole-
of-government approach to monitoring and supporting critical
manufacturing supply chains instrumental to our economic
welfare and national security.
Unfortunately, that provision did not become law last term,
but I am hopeful that we can get meaningful supply chain
legislation over the finish line this Congress.
Mr. Jarsulic, in your written testimony you discuss the
importance of supply chain resilience and, specifically, how
important elements of the supply chain are subject to events in
other countries and can, therefore, be subject to Chinese
Government interference. How severe is the threat, and why
hasn't the private sector been able to proactively identify and
address such supply chain vulnerabilities?
Mr. Jarsulic. Well, I think we have seen multiple instances
where significant gaps in the supply chain manifest themselves
to--and produce significant economic impacts. A salient example
which I talk about is the shortage of chips for manufacturing
autos. The production of autos in physical terms was down,
like, 40 percent, relative to the precrisis level, just because
the chips that are needed to make those autos run weren't
available.
There are lots of other examples where shortages were
revealed in the crisis--are not here, they are manufactured
elsewhere, and the ability to access them was stressed during
that period.
I think that it is quite important to take a systematic
view of the places where there are potential risks. The
incentives for individual corporations to meet risks beyond
their own business needs are not necessarily there. And where
those systemic risks are identified, steps can be taken to
anticipate potential problems. There are simple kinds of things
that could be done, you know, stockpiling of materials that are
needed, but there are analogies to other areas where there are
risks that might apply here.
For example, in power generation, many power authorities
commission the construction of residual generation capacity,
which corporations agree to bring online if there is a surge in
demand for power. So we might think about the production of
things that we really need and might need in an emergency, and
find ways to build that kind of backup or residual production
capacity to prevent risks from becoming significant problems.
Ms. Kelly. And let me ask you this. Last Congress I was
proud to co-lead the bipartisan Supply Chain Act, which would
create an office of supply chain resiliency and crisis response
within the Department of Commerce to monitor supply chains of
critical goods and materials and plan for, as you are saying--
respond to supply chain disruptions.
Could supply chain resilience improve if the Federal
Government played more of an active role in monitoring critical
supply chains and identifying vulnerabilities?
Mr. Jarsulic. I think, you know, studying and monitoring of
these issues can make a very important contribution. You don't
know where the problems are until you identify them.
Ms. Kelly. Sure, and I yield back. Thank you.
Mr. Bilirakis. Thank you. Thanks very much. And now I will
recognize the gentlelady from Arizona, my good friend Mrs.
Lesko, for 5 minutes, please.
Mrs. Lesko. Thank you, Mr. Chair. I am excited to once
again return to this subcommittee. It has such broad
jurisdiction, and it is great.
I am very excited about the future of autonomous vehicles.
I have a huge senior citizen population in my district, and I
am already a senior citizen. I can still drive, but there is
going to be a point where I won't be able to drive.
And a lot of my constituents are having problems getting to
their doctors, getting to the grocery stores, and there is not
enough public transportation available for them. They use the
dial-a-ride, but they have to wait, like, a long time. And, you
know, they complain about it, right? So I think this is a
solution, and it is a solution for the blind, it is a solution
for disabled, and I am excited about it, quite frankly.
Now, I think you know that in Arizona, under our former
Republican Governor, Doug Ducey, he was very excited about
autonomous vehicles, as well. And so we have several companies
that operate in Arizona. One of them is Waymo, owned by Google.
It is partnered with the Chinese automaker Geely. Waymo
currently has a fleet of autonomous rides in Phoenix.
So I have a question for you, Mr. Pugh: Do you--should I
worry--should we worry about the partnership with a Chinese
automobile company with autonomous vehicles as far as will our
data be secure or will the Chinese Communist Party use it?
Mr. Pugh. Well, thank you, Congresswoman. I am not as
familiar with that, the partnership that you referenced. But
what I can say at a high level is that, when the Chinese
Government does have involvement with a company, it is
something we need to be very careful and mindful of, and ensure
that they are not collecting data, and ensure it is not going
back to the CCP.
And then we also need to ensure what we are collecting is
safeguarded and secured. I think those two go hand in hand, and
you can't have privacy without security, and vice versa. So in
that particular example I would--I think we need to make sure
that the privacy and security is accounted for.
Mrs. Lesko. Thank you.
And Mr. Farrah, how would you anticipate the global AV
supply chain to be set up if the U.S. continues to limit the
ability of the U.S. AV industry to develop here while China has
the backing of an eager government?
So, you know, I think of--I remember California a number of
years ago, they wanted to shut down the AV autonomous vehicle
testing, and we picked up the slack in Arizona. So how is that
going to affect it, if we don't change our policy here in the
United States?
Mr. Farrah. Well, first of all, I want to thank you for
your enthusiasm for autonomous vehicles. We, obviously, share
it. And your home State has been tremendous in terms of a
partnership. I think you detail one of our great member
companies, and there are others, as well.
I think that the next point I would make here is that, with
regard to supply chain, autonomy has an amazing contributing
factor here as it relates to supply chain challenges. I will
just give you one example, which is around autonomous trucking.
We have a situation now in this country where we have a
truck driver shortage of nearly 80,000 truck drivers across the
country. That is going to double by 2031. And so autonomous
trucking really offers a solution, and I think it gets to
trying to alleviate the supply chain crisis that a number of
your colleagues have flagged today.
And so that is something where--I have been privileged to
ride in these autonomous trucks. I see the way in which they
are operating. They are viewing things, they are responding to
incidents on the road that a human could never have a hope of
being able to see. And so I think it is going to lead to more
safety for people on the roads, for truck drivers, but better
movement of goods.
Mrs. Lesko. Well, I think so, too, because, you know, as
you said, what is it--like, right now isn't the first vehicle
to have a driver, and it--and then there is, like, a caravan of
other trucks that are autonomous and hooked up to it? Tell me
more about that.
Mr. Farrah. Not so much a caravan, but there are--so
different developers, obviously, are approaching this in
different ways. And there are situations where, in places like
your home State of Arizona, there are autonomous vehicles that
are operating without a human driver sitting in the seat that
can grab control of the wheel.
There are other trucking examples where there is
development that is going on, and there is currently a driver
that is there in case. I have ridden in these autonomous trucks
myself, and there is--they are entirely safe, and they are
operating now.
And so it is really a diversity of approaches, but we are
very eager and pouring a lot of resources into trying to get
these out in the market in greater numbers.
Mrs. Lesko. Well, great. And I am running out of time, but
I was just curious if, when you are answering somebody else's
questions, if you can tell me, any of you, if you realize that
security cameras that are made in China call back--if you are
hooked up to the internet, they call back to China. And so a
lot of the security cameras we use on our homes are made in
China. Just curious about that.
Thank you, and I yield back.
Mr. Bilirakis. Yes, let's take that question for the
record, please. That is so very important. Thanks for bringing
it up.
Next we have my good friend from the State of Florida--we
have a lot of Floridians--that is a good thing, that is a good
thing--on both sides of the aisle.
So, Representative Soto, you are recognized for 5 minutes.
Mr. Soto. Thank you, Chairman. It--Florida is in the House.
Mr. Bilirakis. That is right.
Mr. Soto. First, I am happy to talk about our economic
future as the United States, as it goes vis a vis our economic
rivals, China.
I want to take a moment to set the table for my
constituents. The U.S. GDP, our overall economy right now, is
first in the world at $25 trillion. But definitely, China is on
our tail, right? Chinese GDP is $18.32 trillion, according to
the IMF. When you look at our populations, we are at a scrappy
334 million, according to the census, while China's National
Bureau of Statistics has them at 1.4 billion.
So imagine. We are, pound for pound, the economic
powerhouse of the world. And if you feel like, as Americans,
you are working hard, well, it shows. We are the most
productive nation in the world per capita by far.
Population growth is another interesting thing. Ours is
slowing down. We had a 0.4 percent increase in population
growth in 2022. The vast majority is from immigration,
actually, not even from natural population birth. So as we are
talking about immigration reform and the importance of
immigration, we would be declining in population if we didn't
actually have immigration. The Chinese, they are declining in
population: 850,000 population drop in 2022.
So both of us face challenges, and we are at a crossroads.
So when we come to the topic today of how Americans compete to
win the future, the good news is the 117th Congress was the
most productive in 50 years.
The infrastructure law to help us rebuild America. There is
a big headline in Florida about Governor DeSantis proposing a
$7 billion Moving Florida Forward plan. Over 3 billion of that
plan comes from the new infrastructure law, and over 16.7
billion over 5 years to help redo I-4 and boost SunRail, and
Brightline, and Poinciana Parkway, and other areas in the
district.
And then we passed the CHIPS and Science Act, boosting
microchip manufacturing. We are right now only making 10
percent of the chips, globally. This will help bring us forward
with areas like NeoCity in my district that makes aerospace
microchips and micropackaging and just received a $51 million
Build Back Better grant with more to come.
And then the Inflation Reduction Act, a $369 billion
investment to advance clean energy, to lower pollution, combat
climate change, boosting electric vehicles, which we talked
about a lot, solar, wind, more efficient appliances, nuclear,
and carbon capture.
So the first thing I think is critical is that we don't
push America to default on our debts. That has been talked
about quite a bit already.
The second is we need to find areas of common ground like
the privacy--internet privacy bill that we passed out last year
that I expect will be one of the biggest things we do this
term.
But also implementation of these laws are going to be key.
Mr. Jarsulic, you know, China faces air pollution, water
pollution, plastics. Their soil is toxic with cadmium and other
heavy metals. And the rallying cry of the last generation has
gone viral by young Chinese people vowing not to have children.
We want to have a different future here in the United States.
So how critical is it to our economic success that we implement
the Inflation Reduction Act to combat pollution, to boost clean
energy for our economic future vis a vis competition with
China?
Mr. Jarsulic. Well, I think that the effects of a degraded
environment on health, labor force participation, productivity
are significant. And so, to the extent that we can limit that,
we--that contributes to the competitiveness of the U.S.
And it is also the case that the world is being pushed in
the direction of production and economic behavior that limits
carbon emissions. And so the more that we can do to make that
transition efficiently, the more economic competitiveness we
will have.
And so the kind of support that IRA gives to electric
vehicles, to solar power, and to other forms of--and to the
establishment of other forms of energy--incredibly important.
The support that CHIPS gives to developments, both in basic
science and the manufacture of semiconductors, means that we
will have a better technical base to implement the kinds of
things that will reduce those carbon emissions.
So I think that there is a lot that is being done that will
contribute significantly to our long-term economic
competitiveness and make up for the kind of disadvantages that
we might face in the marketplace when we are dealing with a
competitor who kind of disregards----
Mr. Bilirakis. Well, thank you. I thank the gentleman. The
gentleman's time has expired. I appreciate it. Now we welcome
the gentleman from Georgia.
Welcome to the committee, and the Chair recognizes you for
5 minutes.
Mr. Allen. Thank you, Mr. Chairman, and I thank the
witnesses for being here with us today. And thank you again,
Mr. Chairman. And it is a privilege to serve on this committee
under your leadership.
Mr. Bilirakis. Best committee in Congress.
Mr. Allen. Yes.
Mr. Bilirakis. Don't forget that.
[Laughter.]
Mr. Allen. Well, it has been very interesting here today, I
will tell you this.
Mr. Pugh, first I want to thank you for your service, for
your work with the Army Cyber Institute. The Army Cyber Command
Center is located in the 12th district of Georgia, my district.
And it is good to see how expertise can be shared across the
public and private sectors for data security purposes.
We are not engaged in cybersecurity warfare here, but how
do you see passing a national data privacy framework providing
for more cooperation among allied countries against current and
political adversaries--how do you see that framework?
Mr. Pugh. Well, thank you, Congressman, and I am thrilled
to see the Army represented in Georgia. I spent a lot of time
in Fort Benning, so I appreciate that.
And to your point, I think the biggest issue now,
Congressman, is we don't have a privacy law here. So it is
forcing American companies to follow other frameworks around
the--really, like GDPR and the European Union that is just not
as friendly to businesses. So I think this is, really, a key
opportunity for us to develop a framework, and hopefully others
follow what we view as the American vision.
And I think the critical aspect is there are several
provisions that promote security. Just to flag one of them is
the notice if a consumer's data goes to China, North Korea,
Iran, and Russia. Right now, data can flow there and the
average consumer is totally unaware of it. And that is just a
deep concern.
Mr. Allen. Well, obviously, that is our property, and we
have the right to protect it, and we certainly need to do
something about this.
Ms. Sacks, you have done a lot of work with security-
focused think tanks. Again, you know, of course we passed the
CHIPS Act, which, you know, I think totaled over 250 billion--
$252 billion. And now it looks like we have got a glut of
chips, of semiconductors in the country. What--has your think
tank looked at, you know, what happens when the government
pours money into something, and then it creates market
problems, market issues as far as supply and demand?
Ms. Sacks. Well, I can speak from a personal capacity,
rather than my organization's.
Mr. Allen. OK.
Ms. Sacks. I have not looked at that specific issue. I
mean, I think you raise an important question, which is once--
when governments pick winners and losers, we have to be very
smart about how those resources are allocated, and particularly
because we don't want to mirror China as a nation focused on
industrial policy.
So how do we use State funding and facilitate productive
partnerships between the private sector and public institutions
to understand how do we allocate those resources to avoid
exactly those issues that you have discussed?
Mr. Allen. And we don't seem to look down the road at the
implications of this, as far as the free market.
And Mr. Farrah, the first thing is how much do these these
vehicles cost? I mean, what is the price range?
Mr. Farrah. Congressman, currently it is--as so-called
level four autonomy is being deployed out into the United
States, they are not currently available for private ownership.
And so you have companies that are operating their own fleets
of AVs. They are doing things such as robo taxis and--with the
passenger cars, unmanned delivery pods that are delivering
groceries and whatnot, AV trucks that I mentioned.
And so, while private ownership may be in the future, that
is not where we are currently.
Mr. Allen. So we haven't gotten a market base on the price
of manufacturing those vehicles? OK.
Mr. Farrah. That is correct.
Mr. Allen. You are an innovator. Obviously, this is a
great--this is going to be a great tool for the American
people. What is the best driver of innovation in this country?
Is it free market or government?
Mr. Farrah. Sir, what I can speak to is that our industry
has led in terms of private capital investment into this
industry. Certainly, this has been a private-sector-driven
exercise in terms of deployment of AVs to this point.
But it is important that policymakers shine a light on this
industry because there is, obviously, a lot of work that needs
to get done, both from a Federal legislative perspective as
well as at a regulatory perspective.
Mr. Allen. Right.
Mr. Farrah. And so it truly is a partnership, and we need
your help.
Mr. Allen. Well, Ms. Sacks, I think you hit--I mean, you
hit the nail on the head where how does the government do this,
because they are picking winners and losers. And it affects all
the markets.
So with that, Mr. Chairman, I yield back.
Mr. Bilirakis. I appreciate that very much. OK, now I
recognize the representative Mrs. Trahan for 5 minutes.
I appreciate it, thanks for your patience.
Mrs. Trahan. Thank you, Mr. Chairman.
It is no secret to anyone here today the United States has
been losing the manufacturing race for a long time. It is
certainly not a surprise to anyone in my district, which is
where our Nation's industrial revolution was born, and where
once-great mills have sat empty for years.
The offshoring of manufacturing jobs has hurt almost every
sector, particularly as supply chain issues erupted during the
COVID-19 pandemic. But perhaps the most glaring example of this
dangerous trend is our semiconductor industry. Since 1990, the
U.S. share of global semiconductor manufacturing dropped from
37 percent to 12, and in that time countries like China have
surpassed us in semiconductor manufacturing capacity.
Mr. Chairman, this trend poses a serious threat not just to
our Nation's economic competitiveness but to our national
security. And supply chain disruptions have shown in
excruciating detail, as we have waited on foreign shipments of
semiconductors that have been bogged down in supply chain
disruptions.
Like many of my colleagues on this committee, I have heard
how this issue is impacting businesses and families that I
represent. Massachusetts companies up and down the supply
chain, from manufacturers of cancer screening technology to
defibrillators, have been sounding the alarm about the
disruption's impact on their business and the patients and
hospitals depending on them.
Families looking to buy a used car to make sure they can
get their kids to school on time have had to pay ridiculous
prices, in part because of chip shortages in the automotive
industry. It is for this exact reason that we voted in a
bipartisan manner last Congress to pass the CHIPS Act, the
CHIPS and Science Act, which includes unprecedented Federal
funding to jumpstart our semiconductor industry and reestablish
our Nation's manufacturing leadership.
And when I think about our competitiveness--frankly, our
winning--I do think about the major pieces of legislation that
we passed last year. My colleague from Florida talked about the
Inflation Reduction Act, CHIPS and Science, of course, but also
the bipartisan infrastructure bill.
So, Mr. Jarsulic, I am hoping that you can speak about the
impact that the $52 billion included in the bipartisan CHIPS in
Science Act, as well as the billions of dollars allocated by
the infrastructure law to revitalize our roads, our bridges,
railways, electric vehicle charging stations, high-speed
internet, all that supportive infrastructure, will have on U.S.
domestic semiconductor manufacturing. And frankly, should we
expect more private investment in this critical technology?
Mr. Jarsulic. Yes, I think those $52 billion are divided
into two big parts. One is 11 to support basic science research
and development that are related to semiconductor
manufacturing. I think that that helps to overcome the real
public good problem of doing that kind of basic research. But
there is another $39 billion, the majority of which, 24
billion, provides investment tax credits for private
investment.
And that means that the decision making about what is going
to be built over what time frame really rests with the private
sector. That is, these are credits. They are going to have to
put private capital at risk in order to--you know, to get those
credits and expand manufacturing capacity. So I think that the
notion that there isn't a market-based, a competitive-based
allocation of these funds is a little bit misleading.
That said, those two major efforts, both in terms of basic
research and in terms of incentivizing investment, should do a
lot to increase semiconductor manufacturing capacity. But any
business needs an efficient and effective infrastructure to
operate: good transportation, good water, good power supply.
And I think that the support for that in bipartisan
infrastructure will also benefit semiconductor manufacturing,
as it will most business in the U.S.
Mrs. Trahan. Thank you, I appreciate that.
I will see if I have enough time to switch gears, because I
was so excited to hear so many of my colleagues discuss
privacy. Because the truth is many of the critical devices that
require semiconductors also collect, store, and transmit
personal and even sensitive consumer data.
My team and I thought about this quite a bit during the
markup of the bipartisan and bicameral ADPPA last summer, and
strong data minimization and data loyalty language allows
consumers to escape constant consent popups, which are
particularly useless in a world where sensors devoid of a
screen monitor our vital signs, our sleep patterns, and the
location of our pets to create comprehensive profiles of our
lives that can be used in a range of predictive analytics.
So, Mr. Pugh, maybe for the record, hoping you can speak to
the importance of data minimization to this Nation's cyber and
national security.
Mr. Bilirakis. I appreciate it. You can take that for the
record.
Thank you for the question, and the gentlelady yields back.
And I will recognize the gentlelady from the great State of
Tennessee, home of the number one Florida Gator, Steve
Spurrier, Johnson City.
Mrs. Harshbarger. Oh, you would have to mention that, Mr.
Chairman.
Mr. Bilirakis. Of course, of course.
[Laughter.]
Mrs. Harshbarger. I am trying to forgive him.
Mr. Bilirakis. You are recognized for 5 minutes.
Mrs. Harshbarger. Thank you. My question goes--the first
one--to Mr. Pugh. But let me read a little statement.
As a mother and a grandmother, I am deeply concerned about
the ways TikTok is manipulating our Nation's children. You
know, I have seen reports that detail China's version of
TikTok, which offers the friendly version with educational
videos and learning tools and time limits set on what the
children look at in China. And then you come over here and you
see the opium version, which, you know, addicts our children in
front of their phone. And that educational tool isn't offered
over here, like it is in China.
What are the current data privacy protections for children,
and how could a comprehensive data security standard help
strengthen those protections?
Mr. Pugh. Well, Congresswoman, thank you. Our current
standards, simply put, are inadequate. I mean, we have COPPA.
There were some other attempts to look at children's privacy
legislation. But I think the real answer is a comprehensive
approach, not the diminished attempts that are specifically
at--directed at children. But really, privacy is a concern for
all Americans. And I do think that was a--really, a hallmark of
ADPPA last Congress was, regardless of age, there were
protections there to help you.
Specifically with children, there were several phenomenal
ones, everything from additional resources at the FTC directed
specifically at kids to rules around target advertising for
kids. You could tell that kids were definitely a focus in that
bill, and I think that should be the case going forward.
Mrs. Harshbarger. Well, and I said this when I was on
Homeland. I am like, if your children are on TikTok, get them
off. Get them off. Adults, you are responsible, but children
are not.
Ms. Sacks, I think that we both have questions for you
with--concerning TikTok. And it is--you know, I am tremendously
concerned about TikTok, but I am sure there's many other
Chinese apps that you would suggest that we be watching. And I
guess my question is, what other Chinese companies are you
concerned about, and what should we be asking?
And then the second part is, can you describe how the CCP
is encouraging the adoption of emerging technology like
artificial intelligence and its defensive capabilities, and how
the Beijing's unprecedented emphasis on intellectual property
theft in this sector factors into those efforts?
Ms. Sacks. Thank you, and a lot to unpack there.
Mrs. Harshbarger. Yes.
Ms. Sacks. I guess I will start with the TikTok issue. You
know, I think that there are two important issues on the table.
One is data security--who has access to what--and the other is
the potential to push misinformation online, the recommendation
algorithm.
My understanding is that there is a national security
agreement on the table, and I think it--and I have published an
article which sort of details what exactly that looks like.
You know, from a data security standpoint, if the--if
Oracle has the data in the cloud, there are multiple third-
party auditors and an oversight board that reports to CFIUS. I
think that that would be pretty much locked down.
The question around what kind of information the
recommendation system pushes forward is an important one, and
that also under this agreement would potentially--and it is
called Project Texas, and I have published about it just a week
or so ago--would be, again, subject to verification source code
review, essentially vetted by CFIUS.
I think it is important that the public understand what
that national security agreement would look like, and then have
a debate. Is this enough to address those concerns? And to what
extent would other social media companies also need to meet
those?
You know, I think that, as a mother, I am very concerned
about what information my young children will be looking at
online. And I am terrified, because right now I think it is a
free-for-all. When we focus on specific companies, we can lock
down that information, but it doesn't solve the issue.
Mrs. Harshbarger. Right.
Ms. Sacks. We can ban TikTok, force a divestiture. When my
boys are teenagers I hope that there will be a more
comprehensive solution, because it is not going to address the
way that misinformation is addicting children. And so that is a
much bigger issue than any single company.
Mrs. Harshbarger. Well, absolutely. And not to mention, you
know, when Director Wray says that is a national security
threat--and I know we are not talking about that --but the
tracking of users' data, that is a concern. That is a huge
concern.
And my grandsons are soon to be 6 and 8. So my son and
daughter-in-law just better never bring TikTok to the table,
OK?
And I guess, with that, I will yield back, Mr. Chairman.
Mr. Bilirakis. The gentlelady yields back. And I will
recognize the--my good buddy from the State of Florida, Kat
Cammack, for 5 minutes.
Mrs. Cammack. Yes, Steve Spurrier. Land of Steve Spurrier.
Go, Gators.
Thank you, and congratulations to my good friend Chairman
Bilirakis for hosting this very important hearing today. Thank
you to our witnesses. We are coming to the end, so hang in
there with us.
This topic, our competitive edge against an adversarial
nation who uses the existing multilateral system to bend the
rules in their favor, the Chinese Communist Party, is one of
the most important issues of our time. Indeed, the CCP has very
little regard for basic human rights, environmental
protections, or the rule of law as they continue on their quest
for global dominance.
So I believe that the greatest value that we have as a
nation is our people, our constitutional republic, and our CQ,
our creative quotient. We are innovators.
From the space race to the deployment of the internet, the
United States has been an international leader on scientific
innovation and achievement. Our free market model, paired with
our national creative quotient, including private R&D efforts,
no doubt drives much of our success as a leader in the world.
So the work that we do here today will lead and carry us
through the next several decades.
Without question, the U.S. and our allies must lead the
world in privacy regulations and technological innovation.
Otherwise, we risk allowing malign actors like the CCP to
create a counter set of rules predicated on debt-trapped
economies that will be enticed to leave the rules-based system
and adopt a model made to benefit authoritarian countries run
by groups like the CCP.
So jumping right in, Mr. Pugh, you said in your testimony--
and my good friend from Tennessee alluded to this--you know,
the protections and privacy laws are wholly inadequate, by and
large. How do we balance that patchwork of State laws?
How can we do a preemptive Federal privacy and data
security law that specifically allows for those protections,
while prohibiting the stifling of entrepreneurs or new market
entrants into tech-related industries, quantum computing,
social media, AI, et cetera?
Mr. Pugh. Congresswoman, thank you. And I think you really
answered the question kind of yourself, because preemption is
key. And I think ADPPA was a great substantive step in terms of
how preemption was resolved.
I mean, that is exactly the thing. We need one Federal
standard, not this patchwork that is emerging. Granted, only 5
States will have privacy laws in 2023. We have already seen
dozens and dozens introduced this year and last year. So I
think the real potential of having even more laws this year or
next is going to be there.
And it hurts our small and medium-sized companies, because
they don't largely have the resources to follow all the
developments, the constant amendments at a State level.
Whereas, if they have one standard to look to, it may still
take resources, but at least it is one standard. So I think
that is the key, and making sure preemption is strongly
reflecting a Federal bill.
Mrs. Cammack. I appreciate that. And I am going to follow
up again on my good friend from Tennessee.
We were sitting over here talking about TikTok. You know, I
am the millennial in the room. And so this is a generation--
grandmother, millennial. But, you know, this is a concern to
me, my peers, and the generation coming directly right after
me, the Gen Zs.
I grew up with social media, MySpace, Facebook--today Meta.
These have real-world impacts. Privacy concerns? Heck, one
social media platform can be directly attributed to a political
revolution in nations abroad. So we know that there are real-
world impacts that we have to contend with. So obviously,
TikTok being a huge one.
Representative Harshbarger alluded to the fact that, in
China, on TikTok children 14 and younger are shown patriotic
videos, educational videos, history videos, and they are
limited to 40 minutes. In the United States, they have the
algorithms set to do shorter videos that are meant to create
dopamine hits in your brain.
There was a survey done between the United States and
China, a 14-year-old, asking, ``What is the most aspirational
career you want to have?'' In the United States the number-one
answer was social media influencer. In China they said they
wanted to be an astronaut. If you want to look at the future of
our two nations, start here. That is why we need to be very
serious about how we contend with TikTok and other apps like
TikTok.
So my question--and I know I am running short on time--is
how can we protect our kids, our data, while simultaneously
respecting free market economics in these applications?
The balance is a really tricky one, but we need to have a
game plan moving forward on how we contend with this. And if
any other witnesses want to answer this, I am open to hearing
your thoughts.
Mr. Bilirakis. Let's----
Mrs. Cammack. In 9 seconds.
Mr. Bilirakis. Yes, very brief, and then we are going to
take the question for the record. It is a very important
question, so I want you to have as much time to answer it. This
is what we are facing in this country. Please, briefly.
Mr. Pugh. The short answer, Congressman and Chairman, is
passing a national comprehensive data privacy and security law.
We did a report last year with 125 different entities across
all ideologies, in conjunction with Harvard. And we think that
really is the answer of solving some of these national security
and privacy concerns.
Mr. Bilirakis. Thank you.
Mr. Pugh. Thank you.
Mr. Bilirakis. Thank you, thank you, I appreciate it. I now
recognize the vice chairman.
Congratulations, Mr. Vice Chairman of the full committee,
Mr. Armstrong. You are recognized for 5 minutes.
Mr. Armstrong. Thank you, Mr. Chair.
Ms. Sacks, whether it is national security threats from
aggression, nation states, or data protection regimes, it seems
as if the trend is towards data localization. You have recently
and even today mentioned Project Texas, TikTok's proposed
mitigation agreement to address U.S. national security
concerns, as a potential accelerant to data localization
requirements. And you were speaking with Congressman Dunn about
data free flows with trust.
Does our experience with the challenges of the EU-U.S.
privacy framework and broader international concerns about U.S.
surveillance capabilities make that a realistic proposal in the
near term?
Ms. Sacks. Thank you for raising the issue of data
localization, because I think this gets at an inherent tension
here, right?
Governments around the world, the U.S., in Europe, in
China, in India are increasingly concerned with foreign
government access to data, as well as private-sector access.
And so I think what is happening is the response to this is
increasing requirements would require data to be stored on
local servers and undergo extensive vetting before it is sent
abroad.
Project Texas, from my understanding of what has been
released publicly, would address U.S. Government concerns
around who has access to the data by storing it in an Oracle
cloud with a number of third-party vetters, auditors, to vet
that in terms of the data that leaves. But it also potentially
creates a blueprint to accelerate this trend of digital
sovereignty, which we have seen around the world beyond the
U.S. and China.
And so this question of how do you strike a balance between
facilitating greater data flows which are needed for innovation
and economic competitiveness while also addressing legitimate
data security questions, this is sort of the key question, and
I think it is one that merits much further discussion.
Mr. Armstrong. I literally just came up here from asking
questions about the Chinese Government--or a hacking group in
Chinese--either with coordination with the Chinese Communist
Party, or definitely with the permission of the Chinese
Communist Party actually going after our COVID relief funds.
So, I mean, this is coming from every different place.
But we often discuss CCP's collection of U.S. person data
by citing the 2015 OPM hack, as well as the hacks on Marriott
and Equifax. The followup question is usually how the CCP might
operationalize that data. I think we understand the
ramifications of weaponizing that data against national
security officials or Chinese dissidents to blackmail or
develop kompromat. Can you explain the risks of the CCP
aggregating all the data they have obtained, and the type of
risks it might reveal at the demographic or population levels?
Ms. Sacks. Yes. I mean, to be honest, I think that creating
profiles based on aggregate data is primarily a
counterintelligence concern for individuals with national
security clearances, in the military, or access to sensitive
information. For your average American, what that--what the
impact would probably be more in terms of would that population
or individual preference information--could that be used to
push information that would make, say, a spear phishing attack
more appealing?
It might be more likely that someone would be a--would
click on a link because it appealed to them based on
information that was collected. And so I would say it is--I
would look at it from that angle.
But what I highlighted in my testimony, the more sort of
far-reaching impact is on economic competitiveness, which is a
distinct issue, right? It is on Chinese firms who are able to
access diverse international data sets beyond China. What that
allows them to do is train AI models that could be more
competitive in markets outside of China, where they are
competing head to head with U.S. firms.
So I would bucket the risk. You have national security
issues, you also have targeted misinformation that could be
used from that, as well as economic competitiveness between the
U.S. and Chinese firms. And it is important to sort of be clear
about those distinct buckets of risk.
Mr. Armstrong. Mr. Pugh, I am going to ask you the same
question. You got, I mean, 45 seconds to follow up, so that was
easy.
But, I mean, I think we always operationalize this at the
national security, but it is hard to get it down to my 15-year-
old daughter, who is on TikTok way more than she should be, and
all of these different issues about the data collection.
Mr. Pugh. I think the key point to recognize, Congressman,
is data is not just universal. There's different types of data.
So even when it comes to geolocation data--yes, maybe I am an
exception because I served in the military. But outside of
that, I don't want another country knowing where I am in a
moment, where I am going, where my movements are, regardless--
--
Mr. Armstrong. I don't want my own country knowing that.
[Laughter.]
Mr. Pugh. So I think that that is a risk. And then off of
that, not only they collect the data, they are really bad at
securing it, evidenced by the breach they had in the Shanghai
Police Department last summer. So they are collecting it, and
they are not even making it safe. So even other third parties
and adversaries are getting it.
Mr. Armstrong. And I would just end with I didn't want to
be a social influencer or an astronaut. I wanted to be a
fireman. So I became a lawyer and a politician.
Thank you. I yield back.
Mr. Bilirakis. Oh, well, who are you going to blame for
that?
Folks, well, thank you. We are off to a good start, and I
appreciate everything. Seeing there are no further Members
wishing to be recognized, I want to thank the ranking member.
Again, I want to thank the witnesses for being here today.
And I have got a little housekeeping here. So, pursuant to
the committee rules, I ask unanimous consent to enter the
following documents into the record: a letter from the Alliance
for Automotive Innovation; a report from the Alliance for
Automotive Innovation titled ``Ready to Launch: Autonomous
Vehicles in the U.S.;'' a presentation by the Alliance for
Automotive Innovation titled ``Policy Roadmap to Advance
Automated Vehicle Innovation;'' a letter to the Secretary of
Transportation, Mr. Buttigieg, regarding the Huawei
Technologies; the September 2020 China Task Force report; an
amendment offered to the INVEST in America Act; a letter from
the National Federation of the Blind supporting an amendment to
the INVEST in America Act; a press release from the
Jacksonville Transportation Authority regarding their
partnership with Beep and NAVYA to safely transport COVID-19
samples; an article by Klon Kitchen and Hal Brands entitled
``Tuya may be the China threat that beats Russia's ransomware
attacks;'' a letter regarding the FCC's Secure and Trusted
Communication Networks Reimbursement Program; a letter from the
Consumer Brands Association and Information Technology Industry
Council; a letter from the Advocates for Highway Safety
regarding emerging vehicle technologies and autonomous
vehicles; a report from the Center for Strategic and
International Studies entitled ``Empty Bins in a Wartime
Environment: The Challenge to the U.S. Defense Industrial
Base;'' and finally, a letter from the National Association of
Manufacturers.
[The information appears at the conclusion of the
hearing.\1\]
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\1\ The China Task Force report and the Center for Strategic and
International Studies report have been retained in committee files and
are available at https://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=115346.
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Mr. Bilirakis. OK, very good. We got that in.
Pursuant to the committee rules, I remind Members that they
have 10 days, 10 business days, to submit questions for the
record. And I ask the witnesses to respond to their questions
promptly.
Members should submit their questions by the close of
business on February 15.
If there is no other business, without objection, this
subcommittee is adjourned. Thank you.
[Whereupon, at 1 p.m., the subcommittee was adjourned.]
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