U.S.-China Economic and Security Review Commission, "Hearing: Research and Development, Technological Advances in Key Industries, and Changing Trade Flows with China," July 16, 2008

July 16, 2008
385 Russell Senate Office Building
Delaware & Constitution Avenues, NE
Washington, DC  20510

Hearing Co chairs: Commissioners Michael R. Wessel and Dennis C. Shea

Opening Statement of Chairman Larry Wortzel

Good Morning. Welcome to this hearing on “Research and Development, Technological Advances in Key Industries, and Changing Trade Flows with China.”

My name is Larry Wortzel. I am the Chairman of the U.S.-China Economic and Security Review Commission for the 2008 reporting year. This hearing will be co-chaired by Commissioners Michael Wessel and Dennis Shea. For those who are new to our hearings, let me say that we are a bi-partisan Commission composed of 12 members, six of whom are selected by the Majority and Minority Leaders of the Senate, and the Speaker and the Minority Leader of the House. Commissioners serve two-year terms.

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.

So far this year, we have looked into the activities of Chinese sovereign wealth funds in the U.S. market, as well as Chinese exports of seafood products to the United States. We have also examined China’s expanding global influence, its controls on information and the media, and its use of prison labor.

Today’s hearing will explore the nature of research and development in China and China’s increasing production of advanced technology products.

I am going to ask that each of the panelists speak for no more than seven minutes. This will allow the maximum amount of time for questions and answers.

Let me now introduce Commissioner Carolyn Bartholomew, who is the Vice-Chairman of the Commission.

Opening Statement of Vice Chairman Carolyn Bartholomew

Good morning and thank you Chairman Wortzel.

Welcome to our panelists, to the members of Congress who will be joining us, and to the public and to their representatives in the press corps. I’d like to invite all of you to also visit our website, uscc.gov, where you will find many useful things, including our 2007 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 come November 20, our 2008 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.

Let me give you a few details about our schedule today. Several members of Congress have been invited to speak. Two of our distinguished members will be appearing for the first panel, Representatives Walter Jones, of North Carolina, and Michael H. Michaud, of Maine. This afternoon, Senator Debbie Stabenow, of Michigan, will appear. As is our practice for members of Congress, we will suspend temporarily our regular panel to allow Senator Stabenow to speak. We anticipate hearing from the Senator at 3:15 pm.

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 1:45 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 but that requires a congressional ID when Congress is in session. That is connected to the Russell building by a long hallway.

Today’s hearing is the seventh we have held this year. The final hearing will be on Wednesday, August the 13th. The topic is China's “Energy Policies and Environmental Impacts” With that, let me introduce Commission Michael Wessel, who is one of the co-chairman of the hearing.

Opening Statements
Opening Statement of Chairman Larry Wortzel
Opening Statement of Vice Chairman Carolyn Bartholomew

Panel I: Congressional Perspectives
Representative Walter Jones (R)-NC
Representative Michael H. Michaud (D)-ME

Panel II: Changing Nature of China’s Trade Flows
Dr. Charles W. McMillion, President & Chief Economist, MBG Information Services, Washington, DC
Dr. Mary Amiti, Senior Economist, International Research Department, Federal Reserve Bank of New York, New York, NY

Panel III: R&D: Domestic and Foreign-Funded
Ms. Kathleen Walsh, Professor of National Security Affairs, U.S. Naval War College, Newport , RI
Dr. Kent Hughes, Director, Science, Technology, America, and the Global Economy, Woodrow Wilson Center, Washington, DC

Panel IV: Chinese Development in Key Industries
Dr. Qingjiu Tao, Assistant Professor of Management, Lehigh University, Bethlehem, PA
Mr. Owen Herrnstadt, Director of the Department of Trade and Globalization, International Association of Machinists and Aerospace Workers, AFL-CIO, Washington, DC
Dr. Ernest H. Preeg, Senior Fellow, The Manufacturers Alliance/MAPI, Arlington, VA

Panel I – Continued: Congressional Perspectives
Senator Debbie Stabenow (D)-MI