U.S.-China Economic and Security Review Commission, "2013 Annual Report," Nov. 20, 2013

The report is more than 400 pages in length. A link to it is at the bottom of this page. Below is the text of cover letter from the commission co-chairs to the Senate and House of Representatives.

NOVEMBER 13, 2013
The Honorable Patrick Leahy,
President Pro Tempore of the U.S. Senate, Washington, DC 20510
The Honorable John Boehner,
Speaker of the U.S. House of Representatives, Washington, DC 20510

DEAR SENATOR LEAHY AND SPEAKER BOEHNER

On behalf of the U.S.-China Economic and Security Review Commission, we are pleased to transmit the Commission’s 2013 Annual
Report to the Congress—the eleventh major Report presented to Congress by the Commission—pursuant to Public Law 106–398 (October 30, 2000), as amended by Public Law No. 109–108 (November 22, 2005). This report responds to the mandate for the Commission ‘‘to monitor, investigate, and report to Congress on the national security implications of the bilateral trade and economic
relationship between the United States and the People’s Republic of China.’’ In this Report, the Commission reached a broad and bi-
partisan consensus, approving the Report by a vote of 11 ayes to 1 nay.

In accordance with our mandate, this Report, which is current as of November 13, includes detailed treatment of our investigations of the areas identified by Congress for our examination and recommendation. These areas are:

PROLIFERATION PRACTICES—The role of the People’s Republic of China in the proliferation of weapons of mass destruction and other weapons (including dual-use technologies), including actions the United States might take to encourage the People’s Republic of China to cease such practices;

ECONOMIC TRANSFERS—The qualitative and quantitative nature of the transfer of United States production activities to the People’s Republic of China, including the relocation of high technology, manufacturing, and research and development facilities, the impact of such transfers on United States national security, the adequacy of United States export control laws, and the effect of such transfers on United States economic security and employment;

ENERGY—The effect of the large and growing economy of the People’s Republic of China on world energy supplies and the role the United States can play (including joint research and development efforts and technological assistance), in influencing the energy policy of the People’s Republic of China;

UNITED STATES CAPITAL MARKETS—The extent of access to and use of United States capital markets by the People’s Republic of China, including whether or not existing disclosure and transparency rules are adequate to identify People’s Republic of China companies engaged in harmful activities;

REGIONAL ECONOMIC AND SECURITY IMPACTS—The triangular economic and security relationship among the United States,  [Taiwan] and the People’s Republic of China (including the military modernization and force deployments of the People’s Republic of China aimed at [Taiwan]), the national budget of the People’s Republic of China, and the fiscal strength of the People’s Republic of China in relation to internal instability in the People’s Republic of China and the likelihood of the externalization of problems arising from such internal instability;

UNITED STATES–CHINA BILATERAL PROGRAMS—Science and technology programs, the degree of noncompliance by the People’s Republic of China with agreements between the United States and the People’s Republic of China on prison labor imports and  intellectual property rights, and United States enforcement policies with respect to such agreements;

WORLD TRADE ORGANIZATION COMPLIANCE—The compliance of the People’s Republic of China with its accession agreement to the World Trade Organization (WTO); and
FREEDOM OF EXPRESSION—The implications of restrictions on speech and access to information in the People’s Republic of China for its relations with the United States in the areas of economic and security policy.

The Commission conducted its work through a comprehensive set of seven public hearings and one public roundtable, taking testimony from 57 witnesses from the executive branch, industry, academia, policy groups, and other experts. For each of its hearings,
the Commission produced a transcript (posted on its Web site— www.uscc.gov ). The Commission also received a number of briefings by officials of executive branch agencies, intelligence community agencies, and the armed services, including classified briefings on Chinese investment, China’s cyber operations, China’s foreign policy, and China’s navy. The Commission is preparing a classified report to Congress on these and other topics.

Commissioners also made an official delegation visit to Taiwan, Japan, China, and Hong Kong to hear and discuss perspectives on China and its global and regional activities. In these visits, the Commission delegations met with U.S. diplomats, host government officials, representatives of the U.S. and foreign business communities, and local experts.

The Commission also relied substantially on the work of its excellent professional staff, and supported outside research in accordance with our mandate.

The Report includes 41 recommendations for Congressional action. Our 10 most important recommendations appear on page 27 at the conclusion of the Executive Summary.

We offer this Report to the Congress in the hope that it will be useful as an updated baseline for assessing progress and challenges in U.S.-China relations.

Thank you for the opportunity to serve. We look forward to continuing to work with you in the upcoming year to address issues of concern in the U.S.-China relationship.

William A. Reinsch
Chair

Dennis C. Shea
Vice Chair

Pp. 27-29 of the report

THE COMMISSION’S KEY RECOMMENDATIONS

The Commission believes that ten of its 41 recommendations to Congress are of particular significance. The complete list of recommendations appears at the Report’s conclusion on page 397.

The Commission recommends:

Congress fund the U.S. Navy’s shipbuilding and operational efforts to increase its presence in the Asia Pacific to at least 60 ships and rebalance homeports to 60 percent in the region by 2020 so that the United States will have the capacity to maintain readiness and presence in the Western Pacific, offset China’s growing military capabilities, and surge naval assets in the event of a contingency.

Congress ensure that the Food and Drug Administration (FDA) makes it a priority to increase the number of physical inspections of Chinese food imports at the border; to increase the rigor of those inspections to include testing for pathogens and chemical, pesticide, and drug residues, and processed food ingredients; and to conduct more frequent and thorough inspections in food facilities in China. Congress should also urge the U.S. Department of Agriculture (USDA) to permanently assign inspection personnel to China so that the exporting plants receive regular visits by USDA inspectors.

Congress direct the Department of Commerce to develop a comprehensive, ongoing inventory of Chinese foreign direct investment (FDI) in the United States and, on an annual basis, update the inventory. The inventory should identify the ownership structure of the entity engaging in the investment. In preparing the inventory, the department should call on private sector entities engaged in monitoring Chinese investments in the United States and such other entities to ensure that its report is complete and accurate. The department should prepare a comprehensive report to Congress on an annual basis identifying the FDI by Chinese entities that were made in the previous calendar year. In its report, the department should indicate those investments that received any assistance from the ‘‘Select USA’’ program. The department should also identify, on an ongoing basis, the lines of commerce that each of the investments are engaged in.

Congress direct the Administration to prepare an inventory of existing federal use of cloud computing platforms and services and determine where the data storage and computing services are geographically located. Such inventory should be prepared annually and reported to the appropriate committees of jurisdiction.

Congress assess whether to amend the Committee on Foreign Investment in the United States (CFIUS) statute to allow review of greenfield investments for threats to U.S. national security.

Congress require the USDA and the U.S. Trade Representative (USTR) to conduct a comprehensive review of China’s agricultural subsidies, discriminatory taxes, state trading, and procurement practices; take account of the damages incurred by U.S. farmers and downstream industries; and suggest appropriate remedies.

Congress fund departments of Defense and State efforts to improve the air and maritime capabilities of U.S. partners and allies in Asia, particularly with regard to intelligence, surveillance, and reconnaissance, to improve maritime domain awareness in the East and South China Seas.

Congress assess the extent to which existing laws provide for inadequate or ineffective remedies against the anticompetitive actions of Chinese state-owned or state-invested enterprises operating in the U.S. market. Additional remedies may be required to account for the fact that these enterprises may not be operating based on commercial considerations.

Congress empower the Securities and Exchange Commission (SEC) to set minimum standards for companies listing and maintaining listings on U.S. exchanges and enable the SEC to directly delist foreign companies not in compliance with these standards.

Congress urge the Administration to expedite progress in its implementation of Section 806 of the National Defense Authorization Act for Fiscal Year 2011 (Public Law 111–383), which was intended to enhance the Department of Defense’s ability to address supply chain risks.