Testimony to the U.S. Senate Committee on Foreign Relations on Responding to International Predatory Economic Practices

Virtually no nation is indifferent to the state of its global economic competitiveness. Most policymakers understand that fielding a suite of industries and firms that are able to win, or at least hold their own, in global competition yields important economic benefits. But nations differ dramatically in how they go about competing for success in the global economy. Many generally play by the rules, but a significant and growing share of nations have taken to “innovation mercantilism” by employing a host of unfair domestic economic and trade policies and practices to limit domestic market access to foreign firms in advanced industries and expand foreign market access for their firms. This is particularly the case in China, which has deployed a vast panoply of innovation mercantilist practices that seek to unfairly advantage Chinese advanced-industry producers over foreign competitors. As a result, when companies in the United States want to sell their goods or services, either in the domestic marketplace or overseas, many face formidable challenges.

Any effective campaign to roll back innovation mercantilism abroad – particularly in China – will require a concerted joint campaign with our allies. However, the U.S. government can and should take steps on its own. Congress can take steps to make that easier, such as:

• Require the establishment of a National Industrial Intelligence Unit within the National Intelligence Council;
• Create a sub-directorate at the NSC responsible for combatting innovation mercantilism;
• Pass the National Economic Security Strategy Act of 2018;
• Mandate that USTR produce an annual Global Mercantilist Index (GMI) that comprehensively documents and ranks the unfair economic and trade policies imposed by America’s trading partners;
• Require federal agencies to use USTR’s GMI results when making decisions about foreign aid and preferences;
• Make it clear that if a nation is listed as a worst offender on the GMI that it is no longer GSP-eligible;
• Require the U.S. government to pressure international organizations to no longer support countries fielding egregious mercantilist practices;
• Prevent foreign governments from abusing America’s “foreign sovereign compulsion” defense for mercantilist ends;
• Enable the ITC to create Trade Enforcement Advisory Opinions;
• Pass legislation that allows firms to ask the Department of Justice for an exemption to coordinate actions regarding technology transfer to and investment in to other nations;
• Pass legislation requiring the administration to establish an interagency hub to consolidate existing commercial counterintelligence outreach programs;
• Ensure reciprocity in technology and intellectual property licensing;
• Update CFIUS to reflect the nature of Chinese government influence;
• Boost competitiveness-related investments;
• Pass legislation establishing America’s own “Made in USA 2030” program, which would call on the administration to identify the core technologies most important to U.S. national and economic security and appropriate at least an additional $25 billion annually to support their development;
• Step up efforts to coordinate with members of the European Parliament and the legislatures of major trading partners to discuss common concerns and legislative solutions that could help to roll back Chinese mercantilism.