Move China to ‘new tariff column’ and ease entry for allies’ hi-tech workers, US House panel urges

Sweeping bipartisan report comprises almost 150 recommendations reflecting Washington’s efforts to reset terms of economic relationship with Beijing
‘Balanced approach’ sought of protecting US economy and national security while collaborating better with key partners, says panel chair

US-China relations

Bochen Hanin Washington

Published: 7:45am, 13 Dec 2023

Why you can trust SCMP

The US House select committee on China released its first set of economic policy recommendations on Tuesday, urging China be moved to a “new tariff column” and that hi-tech workers from allied countries gain easier entry to the US.

Adopted by voice vote, the sweeping report comprising almost 150 recommendations reflected efforts to reset terms of the bilateral economic relationship, curb the flow of US capital into China and invest in America’s technological leadership.

The recommendations intended to strike “a balanced approach that adopts a more assertive posture to protect the American economy and our national security when it comes to [China’s Communist Party] and a more collaborative approach when it comes to economic cooperation with our key allies and partners”, said Mike Gallagher, a Wisconsin Republican and the committee’s chair.

The panel, whose formal name is the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party, was formed in January and has no authority to draft or amend laws.

Instead, it is tasked with making recommendations to permanent legislative committees. Its members – 13 Republicans and 11 Democrats – sit on various House committees with jurisdiction over the recommendations, including financial services.

Tuesday’s report grew out of multiple hearings, roundtables and field visits held in the past year.

In line with bipartisan sentiment that Beijing has benefited from its World Trade Organization accession at Washington’s expense, it called for China to be moved from its current “column 1” tariff classification to one that “restores US economic leverage”.

The removal would undermine Beijing’s most-favoured nation status, which allows importers to pay regular duties on Chinese goods.

However, the report did not specify whether a change would entail putting China in the same category as Cuba, North Korea, Russia and Belarus, which all fall outside normal trade relations with the US and face higher duty rates.

Keep China influence probes ‘free from bias’: leading House Democrats

To reduce “market-distorting” products from China, it recommended import duties on legacy semiconductors from the country.

The Biden administration has focused primarily on restricting Beijing’s access to advanced chips, but the committee said China’s strength in foundational chips gave it “an excessive edge over the modern global economy”.

In response to the report, Liu Pengyu, spokesman for the Chinese embassy in Washington, said, “[The] China-US economic relationship is mutually beneficial and win-win in nature.”

“The relevant report, which aims at building walls and barriers and pushing for decoupling and severing supply chains, runs counter to the principles of market economy and fair competition.”

Finding that US investors “wittingly and unwittingly” support China’s human rights violations and hi-tech and defence industries, the panel urged requiring that Chinese firms seeking to register on US national securities exchanges certify they do not work with Beijing’s military, help develop dual-use technologies or use Uygur forced labour.

It further recommended a “policy of denial” for all American tech exports to Chinese companies that it said were involved in espionage campaigns against the US, naming Huawei Technologies and ZTE, and to revoke any existing licenses to such firms.

However, recognising the difficulty of unwinding from China, it suggested enacting legal safeguards to help state and local governments keen on divesting from the country.

In addition, it recommended full funding of “rip-and-replace” efforts that aimed to remove Chinese telecoms companies like Huawei from US networks.

The panel also highlighted the issue of luring foreign talent to the US. It recommended a work-authorisation programme for those with backgrounds in critical and emerging technologies in the Quadrilateral Security Dialogue, “select Nato countries”, and the Five Eyes countries, which include Australia, Britain, Canada and New Zealand.

Properly vetted workers from the Five Eyes working on joint defence projects should be exempt from certain US technology-sharing restrictions, the committee added.

Consensus no more? Democrats start to split from Republicans on China policy

“We can only outcompete the CCP by being the best version of ourselves internally and externally,” said Raja Krishnamoorthi, the committee’s top Democrat. “We should up our game, including by attracting the best talent in the world.”

Ally and partner engagement more broadly featured in the report. It called for consensus building around China’s trade practices and a joint plan to impose diplomatic and economic costs on Beijing if it were to act militarily against Taiwan.

Notably, the panel recommended the State Department negotiate the establishment of a new “plurilateral” export-control regime similar to the Coordinating Committee for Multilateral Export Controls created during the Cold War.

It also suggested reauthorising the Generalised System of Preferences, an economic development programme which waived US tariffs on nearly 5,000 products from about 120 countries. Businesses have argued that its absence makes it more difficult to move supply chains away from China.

But while calling for more trade agreements with allies to compete with “the PRC’s active trade agenda”, the report had nothing to say about one of the largest free-trade frameworks in the Asia-Pacific region: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

That bloc rose from the ashes of the Trans-Pacific Partnership, a 12-member alliance that former president Donald Trump withdrew the US from in 2017.

Senator peppers US State Department nominee Kurt Campbell with questions on China

Trade and industrial policy are contentious points for Republicans and Democrats, and even as lawmakers voted to adopt the report, some voiced opposition to what they called its strong protectionist tendencies.

The committee was more united in strengthening transparency and controls for cross-border investments and influence. It recommended directing the US Treasury to provide more frequent reports on American portfolio holdings, disaggregated by sector and nationality.

It also called for “retroactive” foreign-agent registration, requiring those who have previously acted on behalf of foreign principals to notify the US government, even if their relationship has been terminated.

The panel further recommended reforms to the Committee on Foreign Investment in the United States (CFIUS), arguing that the inter-agency entity lacked the authorities necessary to properly evaluate inbound investment.

One suggested change was to add the US agriculture secretary as a voting member of CFIUS for cases involving farmland or agricultural technology. A similar recommendation was included in draft versions of Congress’s annual must-pass defence authorisation bill, but it was ultimately cut.