On Jan. 10, 2023, the House of Representatives formed the United States House Select Committee on Strategic Competition between the United States and the Chinese Communist Party. The vote filled a pledge by House Republicans to form this select committee on China in the 118th Congress that would focus on the vast economic and military challenges posed to the U.S. by the Chinese Communist Party (CCP). While this was a GOP-driven effort, the bipartisan nature of the vote, 365-65, shows that Republicans and Democrats agree with the seriousness of the China challenge. We’re watching to see if that bipartisanship remains through their hearings, committee actions and legislative recommendations.
The creation of this committee is only one prong of many China-focused policy initiatives Congress will pursue over the next two years, but it should be among its most significant. As entities prepare for a broad, China-focused agenda on Capitol Hill and the administration, Brownstein has the experience and connections to make sure all such groups are kept on the cutting edge of U.S.-Sino policy developments.
Below is a summary of the information released about the committee so far and what it could mean as they begin their work.
On Dec. 8, House Speaker Kevin McCarthy (R-CA) announced that Rep. Mike Gallagher (R-WI) would chair the select committee. Gallagher was a member of the “China Task Force” (CTF), a precursor to this committee that the GOP formed after Republicans and Democrats couldn’t come to an compromise on standing up a China-focused committee in the previous Congress. He is also a member of the House Permanent Select Committee on Intelligence (HPSCI) and the House Armed Services Committee (HASC). Gallagher, a Marine Corps intelligence officer deployed twice to Iraq and a former Senate Foreign Relations Committee (SFRC) staffer, has been broadly viewed as a rising star within the House GOP caucus on national security issues. While Gallagher is known as a vocal critic of China, the appointment of Gallagher is viewed as a signal that McCarthy wants serious, bipartisan cooperation on the committee, given Gallagher’s track record of bipartisan cooperation on China-centric issues.
On Jan. 23, Speaker McCarthy appointed the other 12 House Republicans who will serve on the select committee: Reps. Rob Wittman (R-VA), Blaine Luetkemeyer (R-MO), Andy Barr (R-KY), Dan Newhouse (R-WA), John Moolenaar (R-WA), Darin LaHood (R-IL), Neal Dunn (R-FL), Jim Banks (R-IN), Dusty Johnson (R-SD), Michelle Steel (R-CA), Ashley Hinson (R-IA) and Carlos Gimenez (R-FL).
Overall, these members represent a diverse range of geographical backgrounds, as well as spanning the conference’s ideological spectrum; several of them also hail from districts with notable agricultural and defense interests.
On the Democratic side, Rep. Raja Krishnamoorthi (D-IL) will serve as the ranking member after beating out Andy Kim (D-NJ) for the position. A member of the House Oversight Committee, Krishnamoorthi also serves on the House Permanent Select Committee on Intelligence. He has sponsored legislation in the past that targets China’s action in the technology sector including co-sponsoring a bill with Gallagher that would ban TikTok nationwide.
Krishnamoorthi will be joined on the committee by Reps. Kim, Kathy Castor (D-FL), André Carson (D-IN), Seth Moulton (D-MA), Ro Khanna (D-CA), Mikie Sherrill (D-NJ), Haley Stevens (D-MI), Jake Auchincloss (D-MA), Ritchie Torres (D-NY) and Shontel Brown (D-OH). The Democrats chosen are mostly known to be hawkish in their China policy, with Khanna, Moulton and Torres known for their bipartisan work on foreign policy matters. Brown is the only committee member to vote against its creation, but she did not sign on the statement 23 of her Democratic colleagues raising concerns of the committee spreading anti-Asian hate.
Looking forward to the 118th Congress, Chairman Gallagher has outlined his goals for the new committee in numerous interviews and op-eds. While it isn’t yet clear which bills the committee will recommend, or the House will pass, a number of themes are certain to emerge.
Broadly speaking, we encourage the private sector to have difficult, internal conversations about China and how continued worsening of relations, sanctions or a Chinese conflict with Taiwan will affect their industry, supply chains and U.S. national security.
Corporate America: A common theme is the focus on U.S. business ties with China. Gallagher has singled out entities including professional sports leagues, Hollywood and big banks. The oversight hook here is obvious—and any company with deep economic ties to China should be alert to that—but the legislative path is less clear. Action could range from a blunt instrument like eliminating permanent, normal trade relations with China, to more targeted export controls.
Outbound Investment Controls: One policy area sure to see action is “reverse Committee on Foreign Investment in the United States (CFIUS)” or outbound investment controls. The leading legislative action in this space is bipartisan and led by Sens. Bob Casey (D-PA) and John Cornyn (R-TX). While this approach is supported by HFAC Chairman Michael McCaul (R-TX), it was opposed in the last Congress by the committees of jurisdiction, Financial Services and Ways and Means. This is a highly complex, contentious—and potentially highly economically disruptive—policy set. It is possible that the only action in this space will be a targeted outbound investment executive order from President Biden (expected in Q1 or Q2 of 2023) that focuses on components of advanced artificial intelligence and quantum computing.
Supply Chain: This broad issue set could include incentives and disincentives for U.S. businesses. On the incentives side, it is likely to include macroeconomic policy, such as doubling the research and development tax credit, as well as a discussion of industrial policy like building beyond tech/chips into the health sector. Members have been particularly focused on domestic production of personal protective equipment (PPE), active pharmaceutical ingredients and antibiotics. This policy set could include disincentives as well, modeled on Chairman Gallagher’s bill to prohibit the federal government from purchasing drugs with active ingredients produced in China.
Other possible policy focuses include deepening military and economic ties with Taiwan, humanitarian sanctions regarding treatment of the Uyghurs, intellectual property (IP) theft and forced tech transfers, CCP influence on U.S. think tanks and universities, counters to China’s Belt and Road Initiative (BRI) and data privacy.
Upon his appointment, Ranking Member Krishnamoorthi said he was ready to work with the chair on issues including security threats, Taiwan and IP theft. He also gave a nod to the progressives who voted against the committee saying he would not support any measures that could be viewed as xenophobic or targeting those of Asian descent.
Chairman Gallagher and a large staff will make this a very serious exercise. They anticipate more than rhetoric and investigations, and will pursue thoughtful and tough legislative initiatives and stand-alone bills or through broader vehicles like the National Defense Authorization Act (NDAA). Two recent case studies exhibit quick-moving policy changes that the committee might have their fingerprints on.
First, in an example of how quickly China-related legislation can move, banning TikTok from government phones went from a theoretical discussion to lawmaking exercise with one Senate unanimous consent request. Chairman Gallagher supports an outright ban on the app.
Second, bipartisan consensus quickly formed around the recently passed H.R. 22 (on a 331-97 vote), which bans the Department of Energy (DOE) from making special petroleum reserve sales to Chinese entities. This bill was framed as a rebuke of President Biden by the Republicans who proposed the bill, and yet a majority of House Democrats voted for it because it’s currently bad politics to vote against China-related legislation. Of interest is if this across-the-aisle cooperation will continue in the Senate where the companion bill (S.9) introduced on Jan. 23, and a filibuster proof majority will be required for passage.
The intensely negative view of China held by the American public is shared by bipartisan and bicameral majorities in Congress and is likely to produce both legislative and oversight that span most sectors of U.S. industry and security.
If your company is concerned about these issues, we would love to hear from you. For more information on how Brownstein can prepare organizations for continued changes in China-focused policy, please feel free to reach out to the authors of this alert.
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