U.S.-China Economic and Security Review Commission, "Hearing: China’s Industrial Policy and its Impact on U.S. Companies, Workers and the American Economy," March 24, 2009

March 24, 2009
236 Russell Senate Office Building
Washington, DC 20510

Hearing Co Chairs: Commissioners Patrick A. Mulloy and Daniel Slane

Opening Statement of Chairman Carolyn Bartholomew

Good Morning. Welcome to today’s hearing on “China’s Industrial Policy and its Impact on U.S. Companies, Workers and the American Economy.”

My name is Carolyn Bartholomew, the Chairman of the U.S.-China Economic and Security Review Commission for the 2009 reporting year. Today’s hearing will be co-chaired by Commissioners Patrick Mulloy and Daniel Slane. For those who are new to our hearings, we are a bi-partisan Commission composed normally of 12 members, six of whom are selected by the Majority and Minority Leaders of the Senate, and six from the Speaker and the Minority Leader of the House. Commissioners serve two-year terms. We currently have two vacancies.

Congress has given our Commission the responsibility to monitor and investigate the national security implications of bilateral trade and economic relations between the United States and China. We fulfill our mandate by conducting hearings and undertaking related research as well as sponsoring independent research. We also travel to Asia and receive briefings from other U.S. government agencies and departments. We produce an annual report and provide recommendations to Congress for legislative and policy change.

This is the third hearing for the 2009 reporting year, a year with a new Administration in Washington. The new Administration will have to deal with a lot of critical issues in 2009, along with the worst economic crisis the world has seen in the past 60 years.

Today’s hearing is on China’s industrial policy and the support and nurture of its pillar and strategic industries. China pursues many policies that incentivize the development of indigenous industrial production, like subsidies and tax benefits. However, a major contribution to the development of Chinas industrial base has been the relocation of U.S. manufacturers there.

Later in the year we will have further hearings on China’s internal and external propaganda efforts and China’s activity in Asia and the economic and security implications for the United States.

I would like to welcome our panelists, and kindly ask that each speak for no more than seven minutes. This will allow the maximum amount of time for questions and answers. With that, let me introduce Commissioner Mulloy, who is one of the co-chairman of the hearing.

Opening Statement of Commissioner Daniel Slane

Thanks to everyone for coming today. I would especially like to thank the Senate Armed Services Committee for providing today’s hearing venue.

I would also like to invite all of you to visit our website, www.uscc.gov, where you will find many useful things, including our 2008 annual report and its conclusions and recommendations. It was published last November, and was adopted unanimously by the twelve Commissioners.

The transcript of today’s hearing will be published on our website; today’s written testimony will be posted on the website as well. And by the end of November, our 2009 annual report will appear on the website and in the form of a bound, paper copy. Today's hearing will provide a wealth of information for that annual effort.

For those of you who will be with us the entire day, I’ll note that we will break for lunch at 1:00 pm and will resume promptly at 2:00 pm. There is a snack bar and carry-out in the basement of the Russell Senate Office building, which is called, “Cups and Company.” There is also a cafeteria in the basement of the Dirksen building that is connected to the Russell building by a long hallway.

I would repeat Chairman Bartholomew’s request that panelist limit their opening remarks so that we have plenty of time for questions and answers.

And now, let me introduce our first panel...

Opening Statements
Opening Statement of Chairman Carolyn Bartholomew
Opening Statement of Commissioner Daniel Slane

Panel I: Welcome and Congressional Perspectives
Senator Sherrod Brown (D-OH)
Congressman Walter B. Jones (R-NC)
Congressman Michael H. Michaud (D-ME)

Panel II:  Overview of China’s Pillar and Strategic Industries
Mr. Alan William Wolff, Partner, Dewey & LeBoeuf LLP, Washington, DC
Dr. George T. Haley, Professor, University of New Haven, New Haven, CT
Mr. Clyde V. Prestowitz, Jr., President, Economic Strategy Institute, Washington, DC

Panel III: China’s Use of Incentives to Attract Investment into its Pillar and Strategic Industries
Dr. Ralph E. Gomory, Research Professor, Stern School of Business, New York University, and President Emeritus, Alfred P. Sloan Foundation, New York, NY
Mr. Terrence P. Stewart, Managing Partner, Stewart and Stewart, Washington, DC
Mr. Richard McCormack, Editor and Publisher, Manufacturing & Technology News, Annandale, VA

Panel IV:  China’s Telecommunications and Information Technology (IT) Industries
Dr. Richard P. Suttmeier, Professor Emeritus, University of Oregon, Eugene
       Paper for the record: “The Discourse on China as Science and Technology Superpower: Assessing the Arguments”
Dr. Denis F. Simon, Professor, Penn State School of International Affairs, University Park, PA
Mr. Andrew Z. Szamosszegi, Managing Consultant, Capital Trade Inc., Washington, DC

Panel V:  China’s Nanotechnology and Optoelectronics Industries
Dr. Michael S. Lebby, President and CEO, Optoelectronics Industry Development Association, Washington, DC
Dr. Eugene G. Arthurs, CEO, SPIE, The International Society for Optical Engineering, Bellingham, WA
Dr. Richard P. Appelbaum, Executive Committee, Center for Nanotech in Society, University of California at Santa Barbara, Santa Barbara, CA