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29–363PDF 2018

MODERNIZING EXPORT CONTROLS: PROTECTING

CUTTING-EDGE TECHNOLOGY AND

U.S. NATIONAL SECURITY

HEARING

BEFORE THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTEENTH CONGRESS

SECOND SESSION

MARCH 14, 2018

Serial No. 115–116

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

MO BROOKS, Alabama 

PAUL COOK, California 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

ADAM KINZINGER, Illinois 

LEE M. ZELDIN, New York 

DANIEL M. DONOVAN, JR., New York 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

ANN WAGNER, Missouri 

BRIAN J. MAST, Florida 

FRANCIS ROONEY, Florida 

BRIAN K. FITZPATRICK, Pennsylvania 

THOMAS A. GARRETT, JR., Virginia 

JOHN R. CURTIS, Utah 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

KAREN BASS, California 

WILLIAM R. KEATING, Massachusetts 

DAVID N. CICILLINE, Rhode Island 

AMI BERA, California 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania 

DINA TITUS, Nevada 

NORMA J. TORRES, California 

BRADLEY SCOTT SCHNEIDER, Illinois 

THOMAS R. SUOZZI, New York 

ADRIANO ESPAILLAT, New York 

TED LIEU, California

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

(III)

C O N T E N T S 

Page

WITNESSES 

The Honorable Mario Mancuso, partner, Kirkland and Ellis, LLP (former 

Undersecretary for Industry and Security, U.S. Department of Commerce) .. 3

The Honorable Alan Larson, senior international policy advisor, Covington 

and Burling, LLP (former Undersecretary for Economic, Business, and Agricultural Affairs, U.S. Department of State) ....................................................... 10

The Honorable Kevin Wolf, partner, Akin Gump Strauss Hauer and Feld, 

LLP (former Assistant Secretary for Export Administration, Bureau of Industry and Security, U.S. Department of Commerce) ....................................... 17

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Mario Mancuso: Prepared statement ........................................... 6

The Honorable Alan Larson: Prepared statement ................................................ 12

The Honorable Kevin Wolf: Prepared statement .................................................. 19

APPENDIX 

Hearing notice .......................................................................................................... 50

Hearing minutes ...................................................................................................... 51

The Honorable Gerald E. Connolly, a Representative in Congress from the 

Commonwealth of Virginia: Prepared statement .............................................. 53

Written responses from the witnesses to questions submitted for the record 

by: 

The Honorable Adam Kinzinger, a Representative in Congress from the 

State of Illinois ................................................................................................. 54

The Honorable Ann Wagner, a Representative in Congress from the State 

of Missouri ......................................................................................................... 55

(1)

MODERNIZING EXPORT CONTROLS: 

PROTECTING CUTTING-EDGE TECHNOLOGY 

AND U.S. NATIONAL SECURITY 

WEDNESDAY, MARCH 14, 2018

HOUSE OF REPRESENTATIVES,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The committee met, pursuant to notice, at 10:00 a.m., in room 

2172 Rayburn House Office Building, Hon. Edward Royce (chairman of the committee) presiding. 

Chairman ROYCE. This committee will come to order. And today 

the committee is going to review our export controls and our foreign investment review process. Both are critical to protecting our 

national security and, of course, protecting our economic edge. 

The United States, as we all know, is the world’s largest exporter 

of goods and services, and our trade relationships as well as our 

leadership in science, engineering and manufacturing support between them tens of millions of good-paying American jobs. 

Alarmingly, our competitive edge is increasingly under attack by 

policies from China and Russia and from others that seek to obtain 

advanced technologies and intellectual property by hook or by 

crook. As some may recall, in 2011 this committee held a hearing 

on China’s ‘‘indigenous innovation’’ policy and at that time I noted 

the Chinese Government has been turning up the pressure on U.S. 

and other foreign business to share sensitive technology with Chinese state-owned enterprises as the cost of selling in the Chinese 

market. This is especially true today. 

Making matters worse, our outdated regulatory safeguards have 

potential gaps. Those gaps could permit transfers to potential adversaries of the ‘‘know-how’’ essential to sensitive emerging technologies like artificial intelligence as well as robotics. 

In this global economy, turning inward is not the solution to 

these challenges. But we also cannot allow others to cheat U.S. employers or, worse, use our sensitive technology to undermine our 

own national security. 

And that’s why Ranking Member Engel and I have introduced 

the Export Control Reform Act of 2018, which would repeal the expired Cold War era Export Administration Act of 1979. We would 

replace it with a modern statutory authority to regulate dual-use 

items. Under our approach, we would modernize U.S. export control laws and regulations and they will continue to have broad authority governing the transfer of less sensitive military and dualVerDate 0ct 09 2002 16:42 Apr 05, 2018 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\031418\29363 SHIRL
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use in technology to foreign persons whether that transfer takes 

place abroad or here in the United States. 

As governments like Beijing and others pursue their hard-edge 

strategies to acquire advanced technologies from the U.S. and from 

our allies, our bill utilizes unilateral controls where necessary and 

it also will improve coordination with allies to strengthen export 

controls and inward investment security. 

Meanwhile, the Committee on Foreign Investment in the United 

States—and that’s CFIUS—would continue to review certain ‘‘covered transactions.’’ Those are defined as the acquisition or control 

by foreign persons over a U.S. business. The vast majority of these 

investments are productive and should be welcomed. 

Modernized U.S. export controls and appropriately crafted 

CFIUS reforms are complementary responses to the challenges we 

face. Together, they should improve the ability of the U.S. to remain a leader in innovation and to strengthen the industrial base 

and to protect the technologies essential to national security. 

Our goal is an efficient regulatory system that promotes both our 

national security and our economic prosperity and we have with us 

today three practitioners in the field, each with long experience in 

the CFIUS process and with U.S. export controls, and we hope 

their testimony today will provide the committee with insights into 

how to proceed on these important and challenging issues. 

And I will turn to the Democratic side in case we have any members who would like to make an opening statement, if they would. 

Otherwise, we will go to the witnesses. 

Mr. SIRES. No, I don’t have any statement. Thank you very 

much. Thank you for being here. 

Chairman ROYCE. And so this morning the distinguished panel 

includes Mr. Mancuso. Mario is a partner at Kirkland & Ellis and 

previously he served as the Undersecretary of Commerce for Industry and Security, and as the Deputy Assistant Secretary of Defense 

for Special Operations and Combating Terrorism. 

We have Ambassador Alan Larson. He serves as senior international policy advisor at Covington & Burling. Previously, Ambassador Larson served in a series of senior government positions including as the Undersecretary of State for Economic, Business, and 

Agricultural Affairs, and as the Ambassador for the Organization 

for Economic Cooperation and Development. 

And we have Mr. Kevin Wolf, partner at Akin Gump Strauss 

Hauer & Feld. Previously, he served as the Assistant Secretary of 

Commerce for Export Administration within the Bureau of Industry and Security. 

So without any objection, the witnesses’ full prepared statements 

are going to be made part of the record and members here are 

going to have 5 calendar days to submit any statements or questions or any extraneous material for the record. 

And we will begin with Mario Mancuso. And we will ask him to 

summarize, sir, your remarks and we will go down the panel. 

3

STATEMENT OF THE HONORABLE MARIO MANCUSO, PARTNER, KIRKLAND AND ELLIS, LLP (FORMER UNDERSECRETARY FOR INDUSTRY AND SECURITY, U.S. DEPARTMENT OF 

COMMERCE) 

Mr. MANCUSO. Thank you. Chairman Royce, Ranking Member 

Engel, and other distinguished members of the committee, thank 

you for the opportunity to testify this morning. I am delighted, obviously, to be with all of you and with my fellow panelists. 

As Chairman Royce mentioned, my name is Mario Mancuso. 

Over the course of my career in government I’ve had the great 

privilege to serve in a variety of roles in the U.S. national security 

and foreign policy enterprise. 

I served as Undersecretary for Industry and Security, as Deputy 

Assistant Secretary of Defense for Special Operations, a member of 

the Global Market Board at the National Intelligence Council, and 

as a forward-deployed military officer in combat. 

In these roles, I learned a great deal about how U.S. national security is conceived, debated, and articulated in the interagency, 

how statecraft is actually operationalized and how U.S. national security is advanced on the ground. 

I learned a great deal about the differences between ideas and 

execution, between inputs and outputs, the importance of legal authorities, resources, and accountability and the need for modesty, 

especially in presuming what we know and do not know and cannot 

know and do. 

Today, I am a visiting senior fellow at the Hudson Institute for 

International Security where I continue to work on questions that 

relate to U.S. national security strategy and statecraft in the 

emerging security environment. 

I am also a partner at Kirkland and Ellis where my practice focuses on matters that relate to U.S. national security regulation of 

international activities. 

I want to be clear from the outset I am here today in my personal capacity. The views I express here are mine alone and they 

should not be construed as the views of Kirkland and Ellis or its 

clients. 

I am here to offer some observations in my capacity as a former 

government official about these topics and to answer your questions. 

I will not discuss any specific case or matter that has been or is 

current before the U.S. Government. 

As this committee knows well, both CFIUS and export controls 

are important instruments of U.S. statecraft. By design, they aim 

to effectuate a selective denial strategy, which itself is premised on 

an important assumption—that the U.S. has certain things that 

others want and don’t have. 

While globalization has rendered that assumption outdated in 

many areas, for certain emerging and foundational technologies—

for example, artificial intelligence, robotics, augmented and virtual 

reality, et cetera—that assumption is still generally true today. 

On the other hand, while globalization has diminished our lead 

in certain technology areas, it has also been central to our economic 

and, by extension, our national security success. 

4

One need only look at U.S. overmatch advantages in nuclear and 

electronics-enabled capabilities at critical junctures in our history 

to see how economic scale and technological superiority worked 

hand in hand in service of our global preeminence. 

In this connection, as this committee considers the contribution 

of CFIUS and export controls to U.S. national security, I would invite the committee to keep in mind two questions which may help 

frame the discussion. 

First, at this time in our history, what’s the optimal balance for 

the U.S. to strike between economic openness and restrictiveness 

in order for our country to secure the most important advantages 

of openness while mitigating its greatest risks; second, whether in 

light of that equilibrium CFIUS and the current export control regime is by virtue of its resources and authorities properly configured to effectively implement and maintain this balance. 

In the interests of facilitating this, I’ll just offer some observations. I won’t offer all of them. All of them will be in my written 

testimony, but just a few to start things off here. 

First, foreign direct investment—FDI—is critical to U.S. economic vitality. The collective economic strength and vitality of our 

economy to which FDI clearly contributes helps resource our investment in national defense and extends our soft power reach 

around the world. 

While the U.S. remains a preferred global destination for FDI, 

our global share of FDI has declined in recent years. Because of its 

many benefits, this should be concerning to U.S. policymakers including U.S. national security policymakers. 

Indeed, nations today must compete for foreign direct investment. A failure to consistently attract benign FDI into the U.S. 

would present a long-term systemic national security risk to the 

United States. 

But while FDI is generally good, certain transactions do in fact 

present transaction-specific national security risks. The policy 

question to consider, therefore, is not how to balance economic and 

national security interests but how to balance systemic and transaction specific national security risks. 

In recent years, strategic competition between the U.S. and 

China has increased across multiple domains—economic, political, 

diplomatic, and military—and there is no reason to believe that 

that competition will abate in coming years. 

China is actively pursuing a well-resourced coordinated science 

and technology strategy that seeks to bolster indigenous Chinese 

innovation and to position China to be the world’s technology leader. 

A number of pillars of this strategy, as Chairman Royce rightly 

pointed out, have been described in various official Chinese Government pronouncements such as ‘‘Made in China,’’ a number of 

Five-Year Plans, and certain published technology roadmaps. 

If successful in its articulated form, this strategy would have important Chinese economic and social benefits. It would contribute 

to the U.S.-China and economic relationship but it would also have 

deleterious impacts on U.S. national security. 

As a matter of legal authority, export controls apply to the transfer of specific or general types of technology to foreign persons genVerDate 0ct 09 2002 16:42 Apr 05, 2018 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\031418\29363 SHIRL
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erally. In other words, their reach is not limited by law to a prescribed set of commercial circumstances—for example, corporate 

transactions. 

The controls vary by technology type, end use and end user, and 

are designed to advance one or more national security foreign policy or other goals. The system is highly complex and nuanced. 

As a matter of legal authority, CFIUS has legal jurisdiction over 

many but not all transactions. Three things must be true for a 

transaction to be a covered transaction and thus fall within CFIUS’ 

jurisdiction. 

First, the buyer or the investor has to be a foreign person, the 

transaction must be a controlled transaction, and the target business must be a U.S. business. All of these things are terms of art, 

and while CFIUS’ reach is broad, it is not infinite. 

Export controls and CFIUS have different, independently important, and complementary responsibilities. As Congress considers reforming one or both, it should focus its review primarily on gaps 

in resources and authorities. 

I will end by saying U.S. technology leadership is essential, particularly with respect to certain emerging and foundational technologies to long-term U.S. national security interests. 

To achieve this, the U.S. should pursue and not shrink from pursuing a whole of government strategy that does not rely exclusively 

on CFIUS and export controls or see these areas as the exclusive 

vectors of national security risk but builds strength on strength by 

countering illicit technology transfer however that may occur, enhancing the U.S.’ economic competitiveness and technological superiority. 

Thank you again for the opportunity to be with you today and 

for your commitment to exploring these important issues. I look 

forward to the committee’s questions. 

[The prepared statement of Mr. Mancuso follows:]

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Chairman ROYCE. Thank you, Mario. 

We go to Ambassador Larson. 

STATEMENT OF THE HONORABLE ALAN LARSON, SENIOR 

INTERNATIONAL POLICY ADVISOR, COVINGTON AND BURLING, LLP (FORMER UNDERSECRETARY FOR ECONOMIC, 

BUSINESS, AND AGRICULTURAL AFFAIRS, U.S. DEPARTMENT 

OF STATE) 

Ambassador LARSON. Mr. Chairman, Mr. Engel, and distinguished members, I am delivering my testimony today on my personal responsibility, not on behalf of the organization where I work 

nor its clients. 

Nevertheless, my views have been informed by over a dozen 

years at Covington and Burling and 32 years at the State Department. At each organization, I had responsibilities for CFIUS, trade 

controls, and sanctions. 

As Congress considers CFIUS reform and export control reform 

including the export control——

Chairman ROYCE. Excuse me. Alan, here’s a suggestion. Just pull 

the microphone a little closer. The people in the back indicate they 

couldn’t hear it. There you go. 

Ambassador LARSON. Is that okay? Thank you. 

Chairman ROYCE. Ambassador, thank you. 

Ambassador LARSON. As Congress considers reform of CFIUS 

and export control reforms like the Export Control Act, we should 

remember that the United States benefits greatly from foreign investment and foreign trade. 

Foreign investment promotes economic dynamism, creates jobs, 

spurs innovation, and contributes to our ability to fund strong military and national security capabilities. 

In my view, CFIUS works best when it focusses narrowly on protecting national security. Certain investments that give a foreign 

person control over a U.S. business can have national security implications. 

CFIUS has been effective and adaptable in addressing such national security concerns. Other broader and vague economic goals 

such as economic security in my view should not replace national 

security as the standard for CFIUS. 

Similarly, reciprocity or concerns about another county’s trade 

policy, while very important issues, should be addressed by other 

policy tools and not by CFIUS. 

Congress and the executive branch should regularly review, modernize, and reform CFIUS and export controls to address emerging 

national security risks. In the case of CFIUS, they did so in the 

Foreign Investment and National Security Act of 2007. 

During the 10 years since FINSA was enacted, however, new security challenges have emerged. Today, China has become both an 

economic competitor and an economic partner of the United States. 

In addition, China is both a strategic competitor of the United 

States and, at the same time, China works with the United States 

to promote certain shared security objectives including on containing the threat of North Korea’s nuclear weapons and fighting 

terrorism. 

11

U.S. policy should reflect the complexity and importance of our 

relationship with China. We should avoid actions that unnecessarily feed perception that we believe conflict between our countries is inevitable. 

Now, China and the United States each have strong commercial 

reasons to pursue leadership and critical emerging technologies including artificial intelligence, semiconductors, and robotics, among 

others. 

Some of these technologies have both commercial applications 

and also national security applications. As we consider the implications of these and other technologies on national security, we 

should very seriously consider reform and modernization of CFIUS 

in tandem with reform and modernization of U.S. export control regimes including the EAR and ITAR. 

CFIUS and export control regimes can and should complement 

each other and be consistent with one another, not overlap and not 

contradict each other. Each regime, in my view, should focus on its 

areas of core expertise. 

Other countries often criticize CFIUS and U.S. export controls 

and exaggerate their impact on legitimate commerce. My view is 

that the United States should do what we need to do to protect 

U.S. national security, notwithstanding such criticism and misunderstanding. 

At the same time, we should take a clear-eyed, thoughtful, and 

balanced approach. We should protect national security in ways 

that promote economic dynamism at home. We should protect national security while avoiding to the maximum extent possible actions that unnecessarily foment misunderstandings. 

The United States can and must build deeper and stronger economic and strategic cooperation with China while protecting national security and, in my opinion, we should see reform of CFIUS 

and of U.S. export control laws as complementary to such a cleareyed strategy. 

Thank you, Mr. Chairman. 

[The prepared statement of Ambassador Larson follows:]

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Chairman ROYCE. Thank you, Alan. 

Mr. Wolf. 

STATEMENT OF THE HONORABLE KEVIN WOLF, PARTNER, 

AKIN GUMP STRAUSS HAUER AND FELD, LLP (FORMER ASSISTANT SECRETARY FOR EXPORT ADMINISTRATION, BUREAU OF INDUSTRY AND SECURITY, U.S. DEPARTMENT OF 

COMMERCE) 

Mr. WOLF. Thank you, Chairman, Ranking Member for holding 

this hearing, for introducing the bill, raising the topic. Thanks also 

to Senators Cornyn, Feinstein, and Congressman Pittenger for raising the issue in their bill as well. 

This is a very important topic, and from my time in the government I agree that the underlying motives and concerns to be addressed by each of the bills and the topics should be addressed and 

they’re real and legitimate, and this has been a terrific example of 

a quality public debate on a very serious difficult issue. 

By the way also, the views I express today are my own and not 

on behalf of my firm or any of its clients. 

So I think most people agree with the underlying issue to be addressed and the concern that you described well in your opening 

statement. The issue is how best to address it in a way that does 

more good than harm. 

And in general, with export controls and CFIUS there are two 

primary approaches that are being discussed and one approach is 

a very broad open-ended scope of controls or investment authorities 

that is safe that catches large numbers of transactions and one decides later whether there is a transaction of concern or technology 

to be transferred that would be of concern. 

And the other approach is a much more tailored specific set of 

controls where the government does the hard work up front to 

identify what the threats are and to address the controls more directly with fewer collateral consequences, less uncertainty, and less 

harm to foreign direct investment. 

So my role, in my view, is that to the extent that any of the concerns that are being discussed in either of the bills deal with technologies of concern that are not now controlled by the export control system but that should be. The best way to address it is 

through the existing export control authorities. 

Very simply, all of export controls can really be reduced down to 

one sentence. They are the set of rules that govern the export, reexport, and transfer of technology, software, services, and hardware 

to specific end uses, to specific destinations, and to specific end 

users for various national security and foreign policy purposes. 

That’s my entire professional life in one sentence. I feel very 

small all of a sudden. 

Anyway, within the Export Administration regulations there are 

lots of tools to address each of these issues depending upon what 

the threat is in very tailored ways to avoid unintended consequences and strains on government resources. 

The rules are capable of being adapted unilaterally and quickly 

for emerging technologies that are of concern that weren’t identified as part of our list review efforts. 

18

They are capable of addressing specific end uses, specific end 

users, and specific destinations. The descriptions of the technology 

and the types of information that could be captured and controlled 

by these regulations is infinitely variable, going from at its earliest 

stages of information and developmental technology or know-how 

and leading up all the way through production and operation and 

use technology. 

So to go right to the answer to the question of this hearing—how 

do we best address and regulate cutting-edge technologies for national security reasons—frankly, I think the answer is in your bill 

in Section 109 and it lays out a process of requiring the government, through an interagency process, drawing upon all of the experts that are within the government and outside the government 

and industry and academia to identify what the threats are and 

what the choke point technologies and other information are to address the concerns that you well described in your opening; to publish those as drafts so that industry has a chance to review it and 

comment on it, to avoid unintended consequences and to make sure 

that it’s clear and understandable; if it’s an emergency situation 

use the existing authorities within the Export Administration regulations, to tag those and control those technologies immediately but 

to the extent it is not an emergency, work with our interagency 

friends to submit to the multilateral regimes, these same technologies, so that our allies are controlling it as well for the same 

reason; to support and fund the administration of these regulations 

for education and outreach and for very aggressive enforcement of 

the controls for a level playing field; and then have a process in 

place to regular review and update the controls as threats and 

technologies evolve. 

This bill—the statutory authority for this system—was last addressed 40 years ago. The world is a very different place now than 

it was then. And so I applaud the members in this committee for 

raising this topic and moving forward. 

And with that, I am happy to answer whatever thoughts or questions you might have. 

[The prepared statement of Mr. Wolf follows:]

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Chairman ROYCE. Mr. Wolf, thank you, and for the committee 

members here the reason Eliot and I have introduced this bill is—

this new export control statute is because the Export Administration Act, which has been around for a long time, it was designed 

to handle trade controls on the Soviet bloc. 

So that was before most of the members were on this committee. 

And it’s never been comprehensively updated since then. 

It’s been in lapse, actually, for most of the last quarter century 

and as a result what we’ve done is we’ve had to rely on emergency 

authorities to uphold our dual use and that’s why we are focused 

on this legislation. 

As Mr. Wolf noted, it is key to control emerging critical technologies that may become essential to national security. The Export 

Control Reform Act that we’ve got here before us on the committee 

would explicitly assign this authority to U.S. export control agencies. 

So I will ask Ambassador Larson first. Are you concerned at all 

that attempting to control emerging critical technologies primarily 

through an expanded CFIUS process may negatively impact U.S. 

innovation and, indirectly, technology advantage? 

Ambassador LARSON. Well, thank you, Mr. Chairman. 

I think that one of the things I learned in government was that 

we were usually most effective if we had used the parts of our Government that had the expertise and knowledge to lead. 

And so in respect of controlling and export or transfer of critical 

U.S. technologies, my first point of emphasis would be on the export control regimes that we’ve used in the past. 

I support the idea that those need to be updated to take into account the changed geopolitical situation, the changed technological 

situation. But I think that’s the first way to start. 

I think CFIUS does a good job on its mandate and its mandate 

has been to ensure that there are not acquisitions by a foreign person of control of a U.S. company that would impair the national security; and that can include instances where that U.S. company 

has critical technology and I think CFIUS has handled that responsibility well. 

Chairman ROYCE. I think they’re complementary but I think 

we’ve got to have export controls——

Ambassador LARSON. Precisely. 

Chairman ROYCE [continuing]. In statute and that’s what we are 

focused on. 

Ambassador LARSON. Precisely. 

Chairman ROYCE. So here’s another question and I will ask this 

one of Mr. Mancuso or Mr. Wolf. 

If one of the most pressing concerns driving this debate is technology transfer to China, could U.S. export controls be tailored to 

address this national security concern without excessively impact 

trade with other countries or without creating undue uncertainty 

about whether other transactions could come within the scope of 

CFIUS review? 

Mr. Wolf, if you’d like, sir. 

Mr. WOLF. Yes, absolutely. That’s my primary point about the 

beauty of the export control system in that it is infinitely tailorable 

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cern—at whatever stage of their development that are of concern 

for transfer to specific end users or specific destinations or for specific applications and that way once you identify what the threat—

once the national security experts identify what the concerns are 

that would harm our national security in terms of altering our edge 

on a variety of different areas you can, through the export control 

system, either unilaterally or multilaterally or both identify those 

technologies specifically and clearly and tailor them in such a way 

so that it doesn’t affect the types of transactions or countries or end 

users which are not a threat, particularly with respect to the allies. 

To the extent that the concern is not related to technology transfer, then the export control system may not be your best vehicle 

and other tools such as the espionage rules or the IT theft rules 

or CFIUS for other topics should come into play. 

But I agree with the essence of your question completely. 

Chairman ROYCE. And Mario, do you concur? 

Mr. MANCUSO. So, Chairman Royce, I do concur but I would like 

to add some additional detail because I certainly think that the export control regime has the existing authority, has built within it 

the capacity to be flexible and fast and all the things that Kevin 

mentioned. 

But I would point out that, as a practical matter, in the execution of these responsibilities the system operates very differently 

today. 

So, for example, even the taxonomy of creating CIFs between 

destination, end user and end use, kind of suggests the Cold War 

and 9/11 era thinking around export controls and products outside 

the United States. 

I think the fact of the matter is that for some of these emerging 

technologies that transfer is occurring within the United States. 

So while I agree the authorities are broad enough, I am not sure 

the resources are there or the practice sufficiently developed that 

we focus on illicit tech transfer inside the United States because 

I think that’s critical and that’s fundamentally different than the 

Cold War. 

One other point, Chairman Royce, if I may. The other thing 

that’s difficult is during the Cold War we—our U.S.—there was tremendous agreement with U.S. strategic allies about the Cold War 

threat and at the time our strategic allies were not our economic 

competitors. 

Today, they are both strategic allies and we are thankful for 

them but they also happen to compete with us globally. And so we 

just have to keep in mind that the context is a little different even 

though the authorities are robust. 

Chairman ROYCE. Thank you, Mr. Mancuso. 

Here’s one more question for you. So we’ve had a 30 years timeframe here. We’ve had a number of U.S. Presidents but they’ve 

only blocked a total of five CFIUS transactions, two of which happened under this administration here recently. 

So given the news yesterday about the White House stopping 

what would have been the largest deal in tech history, is it fair to 

conclude that the CFIUS process is evolving toward a stricter review process irrespective of potential legislation here by Congress? 

33

Mr. MANCUSO. I will take that question first. I am not going to 

comment on that specific transaction but I will just comment on 

the fact that——

Chairman ROYCE. Yes, I remember your caveat coming into the 

testimony. 

Mr. MANCUSO. Yes. The two transactions have been blocked in 

really as many years, right. 

Chairman ROYCE. Right. 

Mr. MANCUSO. Actually, now three. 

Chairman ROYCE. Right. 

Mr. MANCUSO. I think, frankly, the current—the pharma bill 

largely but not completely would implement current agency practice with CFIUS, okay, and you can quibble about whether or not 

CFIUS is acting beyond its current authorities but I think it would 

largely implement that. 

Chairman ROYCE. Yes. 

Mr. MANCUSO. But I do think the blocking of the transactions 

suggest that the United States Government, the executive branch, 

is taking these issues seriously—perhaps in a blunt way, but it’s 

taking these issues more seriously and I think that the U.S. Government needs to take these issues more seriously. 

Chairman ROYCE. Thank you, and Mr. Wolf, you wanted to comment on that. 

Mr. WOLF. So just to follow up and repeat, the key with all of 

this is to spend the time and the resources and to have the creativity to identify those emerging technologies of concern that 

aren’t normally looked at in the traditional export control system 

which we are used to in terms of weapons of mass destruction or 

traditional military items. 

And for this effort to succeed and the former efforts to succeed 

and the policy objectives in both to be achieved, that, I agree, what 

really needs to be spent is a lot of very clever thinking, the addition of new resources to the existing system to reach outside the 

box to identify what those technologies are that are not now controlled but are emerging but should be and to list them and regulate them to the end users and end users of concern. 

With respect to the CFIUS question you asked, it all goes down 

to the deliberate non-definition of national security. National security evolves. 

It changes the legislation either the current bill and the—now, 

the existing statute does not define what that means. It’s up to 

those in charge in order to apply their discretion to what the threat 

is today. 

I believe that the CFIUS system today and before is adequately 

addressing those and not approving transactions that would leave 

unresolved national security concerns. 

So there can be a guide to what national security means but trying to restrict it or identify or specifically tailor it I don’t think 

would be a good idea because threats and issues evolve. 

Chairman ROYCE. Thank you, Mr. Wolf. I appreciate it. 

Mr. Engel, ranking member. 

Mr. ENGEL. Thank you, Mr. Chairman. 

I was happy to join with you a few weeks ago in introducing the 

Export Control Reform Act in a bipartisan way and, to me, that’s 

34

been a hallmark, as we’ve said so many times, of the way this committee operates in a bipartisan way. I wish that more of the committees in this Congress were that way. But I am very pleased that 

we do. 

I am pleased we are following up with this hearing which will 

help bring members of the committee up to date on our system for 

controlling the export of dual-use goods and technology, and it isn’t 

something, obviously, we talk about a lot. 

But oversight of the export of dual-use items—that is, items that 

have both military and commercial applications is an important 

part of our committee’s jurisdiction. 

In my view, it’s just as important as our work regulating the export of military items. A few decades ago, the defense sector nearly 

always drove the development of high tech, which later ended up 

on the commercial sector, and today the opposite is often quite 

true. High tech in the commercial sector is now often a precursor 

of advanced weapons. 

So your bill, Mr. Chairman, will help us take a fresh look at our 

export control system to bring it up to date with the modern reality 

of the way these technologies are developed and sold, and it would 

give us an updated charter that grapples with the global risks of 

sensitive technology falling into the hands of our adversaries. So 

this update is long overdue. 

As was mentioned, previous law was last revised in 1979 in the 

depths of the Cold War and is replete with out-of-date provisions 

that don’t reflect national security’s provisions today. 

It also expired in 2001. It means the authority granting export 

licenses is no longer based in statute but relies on temporary authority that is now nearly two decades old. 

Last year, some 34,000 licenses were processed for exports of 

sensitive technology, and if you ask me, this isn’t something we 

ought to be doing willy-nilly. 

We need a sound updated and permanent statute and that’s why, 

Mr. Chairman, I was so happy and proud to join with you on this. 

Let me ask Mr. Wolf and Mr. Mancuso first—each of you managed the export control system while it was under temporary emergency authority and while it was under legal challenge. 

So I would like to get you on record. Would you agree that it 

would be better to have a sound statutory authority for this system? 

Mr. MANCUSO. Absolutely, Mr. Engel, and I would go further and 

say that I think that U.S.’ whole of government strategy should be 

built around export controls, not built around CFIUS. 

Mr. ENGEL. Thank you. 

Mr. Wolf. 

Mr. WOLF. While the existing IEEPA authority is sufficient legal 

authority for the existing regulations and enforcement there 

under—I am not denying that—I agree with you that having permanent legal authority in the form of this or a similar bill is very 

important for a variety of reasons and also to express the will of 

Congress with respect to a very different world that exists now 

than existed in 1979. So I agree with the point of your question. 

Mr. ENGEL. Thank you. 

35

And let me ask you another one, Mr. Wolf and Mr. Mancuso. 

Last year, the Export Control Bureau at Commerce and its partners at DOD and State processed 34,000 licenses, and the trend 

will continue to be upward. 

Are the government’s resources adequate to handle that volume 

and make good decisions? I will start with Mr. Mancuso. 

Mr. MANCUSO. So just like any enterprise, the government can’t 

do everything everywhere all the time. The number of those licenses—I think BIS has historically been under strain. 

I will defer to Kevin on his recent experience. I served for President Bush in that role. But I think as a general proposition, yes, 

my recollection is that the bureau needs more resources. 

But I don’t think of resources only in terms of financial resources. I actually think injecting the Bureau of Industry and Security with additional national security acumen and additional 

connectivity with the rest of the government is important. 

I am not suggesting that isn’t there. I just think that as an agency that’s embedded within a Cabinet department whose principal 

clients, if you will, or broader commerce I think it’s imperative for 

that agency to remain connected with its national security and foreign policy colleagues to effectively carry out its mandate. 

So resources are both financial—would be important—but also in 

terms of enhanced capability and connectivity with the national security enterprise of the United States. 

Mr. ENGEL. Thank you. 

Mr. Wolf? 

Mr. WOLF. It’s great no longer being in government because I 

could answer your question without being limited to instructions to 

stick to the budget given. 

And, yes, absolutely it’s for enforcement both in the United 

States and outside the United States are critical and the authorities to do it in order to keep the level playing field and to deter 

those who would violate the regs—for more industry education and 

outreach, particularly to small and medium-sized businesses I 

think would be critical, and then going to the point of this hearing, 

more resources in terms of both money and personnel but creative 

thinking to identify the types of emerging technologies that aren’t 

traditionally part of the export control system and working with 

people that aren’t traditionally part of the export control world to 

identify those threats that are novel and not previously considered. 

And then with respect to resources, that then leads to what I 

would advocate and always wanted to do on the dual-use side, 

which is, frankly, a top to bottom list review effort of everything 

in the very long list of controlled items to see what’s there that no 

longer needs to be—in light of evolving technologies and going back 

to the emerging point, what isn’t there but should be, and that just 

requires a substantial multi-year effort working with industry, 

working with experts and the Defense Department, largely, and 

other parts of the government to figure that out as opposed to the 

sort of regular process that exists today, which is adequate and 

good but I think it should be a lot more robust and aggressive. 

Mr. ENGEL. Thank you. 

36

And Ambassador Larson, I have one quick one for you. Given 

your experience at State, are the budget and staff cutbacks that we 

are seeing at State having a negative effect on the department? 

Ambassador LARSON. I haven’t worked there for 12 years but my 

judgment is that it’s very hard for the State Department to do the 

missions that it’s been asked to do with such a tight budget situation, certainly in the areas I was responsible for in economics. I 

think that’s true. 

Mr. ENGEL. Thank you. Thank you, Mr. Chairman. 

Chairman ROYCE. Thank you, Mr. Engel. 

We go to Mr. Chris Smith of New Jersey. 

Mr. SMITH. Thank you very much, Mr. Chairman. I want to 

thank our witnesses for their insight and recommendations. 

Mr. Chairman, I am very concerned by reports that U.S. companies are selling equipment and technology that is being used by the 

Chinese Government in its ubiquitous surveillance and detention 

program, including the targeting of Uighur Muslim ethnic minority 

persons in western China. 

Some estimates suggest that something like 500,000—some put 

it much higher—Uighurs are being detained in political education 

centers, which are really just detention centers. 

This is a staggering figure. Included in the crackdown are family 

members of Voice of America, Uighur-language broadcasters. 

Chinese police are gathering and storing DNA samples, fingerprints, iris scans, and blood types, and other biometric data from 

all Uighurs between the ages of 12 and 65. 

Human Rights Watch identified a Massachusetts-based company, 

Thermo Fisher Scientific, as supplying the Chinese Government 

with DNA sequencers. 

Other companies are providing surveillance cameras or software 

for facial recognition equipment. 

Would you say that United States law bars U.S. companies from 

exporting technology that aids in the crackdown of the Uighurs? 

To me, that would seem clear. The 1978 amendment to Section 

502(b) of the Foreign Assistance Act of 1961 states that export licenses may not be issued under the Export Administration Act of 

’69 for the export of crime control and detection instruments and 

equipment to a country, the government of which engages in a consistent pattern of gross violations of internationally recognized 

human rights, unless the President certifies in writing to the 

Speaker of the House and the chairman of the Committee on Foreign Affairs and the Senate Foreign Relations that extraordinary 

circumstances exist warranting provision of such assistance and 

the issuing of such a license. 

We’ve checked with the House Foreign Affairs Committee and 

Speaker’s office and neither have received a certification for this 

sale of detection and surveillance equipment to China. 

So the question is: Are companies allowed to export that, especially now that we know that it’s being used against the Uighurs? 

Are you aware of any company selling equipment and technology 

that China is using for its massive police state surveillance efforts, 

and how can U.S. companies sell technology and equipment that is 

being used for these purposes? 

37

Is that a problem that the Commerce and the State Departments 

are not policing this area very well? Is it a matter of negligence, 

or is the problem with the law and does that law have to be rewritten in a world where DNA sequencers, biometric data gathering, 

and the use of artificial intelligence for surveillance is now becoming commonplace? 

Ambassador. 

Ambassador LARSON. Well, thank you, Mr. Smith. I would like 

to defer to the two colleagues who actually ran export controls. 

Mr. SMITH. That’s great. 

Mr. WOLF. Sure. So most of this discussion today is about national security controls. But foreign policy controls, crime controls, 

which includes human rights issues that you raised, are very much 

a part of——

Mr. SMITH. If I could interrupt. 

Mr. WOLF. Yes. 

Mr. SMITH. I would always say that human rights violations, particularly on such a massive scale, absolutely rise to the level of a 

national security issue for the United States. 

Mr. WOLF. Okay. Fair point. Fair point. I often—but in any 

event, it covers both, either national security, foreign policy, human 

rights, however defined. 

And the key to the point of your question is with respect to the 

technology, and I don’t know the facts involved, is whether the 

items of concern are listed on the commerce control list and there 

are long lists of items that are controlled for crime control—CC 

reasons—such as fingerprint equipment and things like that that 

are controlled for exactly the reasons that you just described. 

With respect to the facts that you’re dealing with, the question 

would be whether they are on the list now and, if not, should they 

be or if there are reasons where they’re not. 

Again, I don’t know but that would be the question to ask and 

to work with BIS, and even to the extent that it’s not the equipment at issue but the act of the foreign parties that are of national 

security or foreign policy concern, then BIS and the EAR have the 

authority to list particular entities which could result in the prohibition on the export of any items—coffee cups, biometric equipment, et cetera—for the sake of exerting pressure on companies 

outside the U.S. or entities from engaging in bad acts, and that’s 

called the entity-less process and it’s a tool that BIS has to address 

issues such as along the lines that you describe to the extent that 

listing the equipment for control would not achieve the objectives 

sought. 

Mr. SMITH. Thank you. 

Mr. MANCUSO. Congressman Smith, my experience at BIS has 

been, you know, somewhat dated but I will answer your question. 

The authority exists to stop those kinds of items. In the last decade, of course, the technology, I believe, in this area in particular 

has really developed. 

But during my time at BIS we took this very seriously. Some of 

those items we in fact interdicted but some of these items were essentially dual use so we did not. 

38

But I agree with the premise of your question, which is that this 

is an area that the export control regime should look at and consider against U.S. policy objectives. 

So the legal authority is there and it’s a policy question about 

whether it’s done on any given basis. 

Mr. SMITH. Thank you so much. 

Mr. MANCUSO. Thank you. 

Chairman ROYCE. Thank you. 

Mr. Brad Sherman of California. 

Mr. SHERMAN. As others have noticed, we are operating for the 

last quarter century under an expired dual-use export statute—the 

Export Administration Act. 

Its regulations are kept in force under IEEPA. This is not regular order. This is not the rule of law as it is supposed to be carried 

out. 

It has worked, more or less. This is a critical area of jurisdiction 

for this committee and we’ve allowed the executive branch to run 

the policy. 

We’ve got to change that, of course, so that’s why I commend 

Chairman Royce and Ranking Member Engel for introducing 

5054—that’s H.R. 5054—to update the statute in this area. 

This is not the first attempt. There have been many attempts 

over the years. About a decade ago, we faced a bit of a crisis because DDTC in the State Department was taking many, many 

months to process applications and tens of thousands of applications were languishing. 

Pressure by this committee and the subcommittee that the chairman chaired and then I chaired and then he chaired again at least 

pushed the administration to solve that problem. 

The major effect of legislation in this area was to move satellites 

from the munitions list back onto the commerce list. There are 

many who believe that the maximum national security can be 

achieved by putting the maximum controls on the maximum number of items. 

This may not be the case. When we don’t export goods we weaken our industrial base, setting back the money that’s available to 

develop the weapons and technologies of the future. 

When we don’t sell something, the buyer goes somewhere else 

and strengthens the industrial base of a country willing to sell to 

them and perhaps willing to sell to an even worse country. 

And so I’ve been a proponent of having a taller fence around a 

smaller field and that is to figure out what we are going to control 

and control it very well. 

I should point out that China blames our technology controls for 

the enormous trade deficit. That is just their attempt to lie about 

the real reasons for the enormous trade deficit. 

Let’s see. One area that I would like to address to the witnesses—believe it or not, I have a question in here, which is new 

for me—is should we make the decisions based—especially at the 

Commerce—well, does Commerce look at the impacts the technology transfer will have not just on the narrow security issue of 

whether that particular item will be misused in a way that hurts 

our security but from an employment standpoint, from an industrial base standpoint? 

39

Do we take a look at how the transfer of that technology will 

lead to the outsourcing of whole areas of production? 

So, Ambassador, I will start with you. Does Commerce take a 

look at the industrial base and especially the jobs issues? 

Ambassador LARSON. Thank you, Mr. Sherman. If I may, because 

my expertise doesn’t lie primarily in the Commerce Department——

Mr. SHERMAN. Then I will go to Mr. Wolf. 

Ambassador LARSON [continuing]. I would like to answer the 

question in a broader frame. Is that all right or should I just 

turn——

Mr. SHERMAN. Why don’t we go to the people who will answer 

it their own way? 

Ambassador LARSON. That’s fine. 

Mr. WOLF. Sure. I am not of the view of those who subscribe to 

there should be a balance between national security and jobs or 

economic security. National security is paramount and all decisions 

are to——

Mr. SHERMAN. Yes. I am asking here are there times where we 

should say no, not because that one item could hurt our national 

security but because the export of that particular technology will 

allow a competitor to enter a whole new field that previously had 

been dependent on U.S. technology. I am not saying say yes to create jobs. I am saying are there times we should say no to protect 

jobs. 

Mr. WOLF. That variable is not a factor in what the Commerce 

Department considers when deciding whether to approve or deny 

an individual license. It’s if that technology would create a national 

security threat you approve—you deny it or mitigate it——

Mr. SHERMAN. So if there’s a crown jewel that supports tens of 

thousands of jobs in America because we have that technology, 

Commerce may allow it to be exported? 

Mr. Mancuso. 

Mr. MANCUSO. So, Congressman Sherman, I would take the approach no, we wouldn’t because we don’t balance national security 

against jobs. We certainly balance——

Mr. SHERMAN. I think you’re making the same mistake on the 

question. 

Mr. MANCUSO. No, actually——

Mr. SHERMAN. Do we say no, you can’t export that item even it 

may be consistent with national security, but because the export of 

that item means a whole industry is being exported. 

Mr. MANCUSO. I think it’s important to keep in mind the two 

risks you identified—the transaction risk and systemic risk—this 

industrial base issue. 

I think with respect to certain crown jewels where the actual 

law—national security loss in any given transaction—an export of 

the crown jewel, to use your example—I would take the position we 

don’t balance that. If it’s a crown jewel, it’s a crown jewel. 

On the other hand, we have to be very discerning about what is 

a crown jewel because there are many technologies that might be 

sensitive but are not crown jewels and with respect to those economies of scale matter. 

40

Semi—lower-grade semiconductors are a good example of why we 

export them around the world and why it’s important to export 

those around the world because the U.S. has an interest in protecting crown jewels but has no interest in creating protected foreign markets. 

Mr. SHERMAN. I’ve gone over time. I yield back. 

Mr. MANCUSO. Has no interest in protecting—creating protected 

foreign markets if it’s not advancing a U.S. national security interest. 

Chairman ROYCE. We go to Mr. Ted Yoho of Florida. 

Mr. YOHO. Thank you, Mr. Chairman, and I appreciate you guys 

being here. I could sit here all day and talk to you guys about this 

stuff because I think it’s so important. 

Mr. Mancuso, you brought up that the U.S. Government should 

build its policies around export controls, not CFIUS. Did I hear 

that right? 

Mr. MANCUSO. Yes, and what I meant by that, Congressman, is 

that export controls is a big piece. Obviously, CFIUS plays a very 

important role. But we have to think of complementary——

Mr. YOHO. That’s what I want to—they need—that can’t be and/

or. 

Mr. MANCUSO. They can’t be separate. It’s not and/or. It’s both. 

Mr. YOHO. They’ve got to be together. You know, we were talking 

about intellectual properties and we just came back from a trip to 

Thailand and they were talking about the special 311 report on 

IPRs and how Thailand is on the watch list. But they’re doing the 

things necessary to make sure that they protect our IPRs of our entrepreneurs. 

We are talking about intellectual property and it seems to rotate 

more around national security interests or the Broadcom or 

Qualcomm deal that the President stepped in, and as Chairman 

Royce brought up, the current administration did step in twice of 

the five times that were done in a period of years. 

And if you have an aggressive executive office that’s well but we 

need to make sure that the rules are in place and I bring up—it’s 

not just the intellectual property on a national security or with 

semiconductors, things like that. 

I was in a meeting yesterday where our researchers from our 

land grants were working with biogenomes with plants and he 

says, ‘‘I am an adjunct professor in China because they pay me 

three times what I am paying here.’’

And what they’re doing is they’re taking our intellectual property 

in research and development in the ag science fields, taking them 

over there and it’s not benefiting us. 

They’re benefiting from our beginning research and I think this 

too is something that should be looked at different than we do now. 

And we’ve seen this over and over again. We saw the story up 

in Iowa where the Chinese operatives were stealing GMO corn, 

taking it over there and, again, it’s a competitive advantage that 

they will get over us. 

So with that, is anybody looking at the biosciences? Before you 

answer that, the Chinese Government plans to force $9 billion into 

the National Precision Medicine Initiative before 2030. 

41

That’s a lot of money and it’s similar—the U.S. has only put in 

$215 million to their $9 billion and it’s clear that they’re going to 

get the competitive advantage. 

And then one has to wonder why is China building such a large 

pool. Right now, they have 30 percent of the world’s genomics that 

they control and I can see this as a weapon in the future, you 

know, when you can start manipulating genes against a population 

and, again, we’ve had our medical researchers say that they’ll start 

drug trials. They run out of money here. China picks it up and finishes it. 

So this drug that we put the initial research into it gets developed with an Asian population and it may not work the same in 

a Western population. 

And so are we looking at those as strong as we are on radars and 

semiconductors, in your experience? And that’s for all of you. 

Mr. MANCUSO. So, Congressman, export controls and CFIUS are 

complementary but they’re only two instruments we have to 

counter some of the things. 

So things like industrial espionage, frankly, the purposeful stealing of technologies export controls is likely not going to catch. 

We need other instruments for that, and other parts of the government have been working on that. I can’t tell you that my information is up to date what the progress of those efforts are. 

But if the premise of your question that we should be watching 

that is what—if that’s what it is, I agree with it. So that’s when 

I——

Mr. YOHO. Well, let me narrow that down. Do we have the controls in place now to protect all the sciences that we are doing? Are 

we mainly just focused on the telecommunications and the semiconductors? 

Mr. MANCUSO. This goes to—and then I will pass it over to 

Kevin—we have the authorities to control all of that. 

The government as a whole needs to and regularly does discuss, 

you know, views about what technology should be controlled but 

whether those specific technologies are controlled. 

Certainly, some radars are controlled. Certainly some therapies 

are controlled. But I am not quite sure if all of them, at least the 

ones that you’re thinking about are. 

Mr. YOHO. I think that’s something we need to weigh in and you 

brought up. Countries not individuals today are spying and they’ve 

always done that and they’re always going to do that. 

But what we are seeing is a different geopolitics today than we 

had 15, 20 years ago. We have a very aggressive China going after 

things by hook and crook and it’s not just the individual out there 

doing the espionage. It’s a country and that country is taking that 

stuff from us. 

Mr. Wolf, if you want to weigh in, in 5 seconds. 

Mr. WOLF. No, export controls are not the solution to all those 

issues. They’re not good for industrial policy. They’re not good for 

economic espionage or IP theft or funding issues or R&D advantages. 

So all of those things that you mentioned are very important. 

But the EAR, the Export Administration Regulations, are probably 

42

not the best place to try to address them, given the national security and foreign policy focus of them. 

Mr. YOHO. I thank you for your time and I would like to follow 

up with you later. 

Mr. WOLF. Sure. 

Mr. YOHO. Mr. Chairman. 

Chairman ROYCE. Thank you. Thank you, Mr. Yoho. 

We go now to Mr. Albio Sires of New Jersey. 

Mr. SIRES. Thank you, Mr. Chairman, and thank you for the 

panel that’s here today. 

And I just want to follow up on my good friend from Florida on 

some of the things that he said. I know the title of this hearing 

today, but I really want to get it down to basics so I can understand some things. 

First thing, I remember a few years ago with solar panels—we 

developed the panels—energy. China gets it and then they dump 

the solar panels on us. 

I represent New Jersey. I constantly hear from the pharmaceutical industry how Canada dumps things in America, some of 

the things that we develop here. 

Now we have India. Now South America is getting into the act. 

I know that—I keep hearing that we have the authority to control 

these things—these imports. 

How does that happen? How do we develop the energy—the solar 

panel energy, goes away from here, comes back here. Don’t we have 

any kind of control on that stuff? 

And how, if we develop these medicines in the pharmaceutical industry and we have places like Canada, which is supposed to be 

our best trading partner, dump the stuff here. I meant, to me, I 

am missing something. 

And I know Mr. Wolf, I hear you going back and forth. Sometimes you talk too fast for me. Maybe I’m stupid this morning. 

But, you know, I would just like to get some sort of a response. 

Ambassador LARSON. Well, I thought—yes. Congressman, maybe 

I could begin to address some of your very good questions. 

You know, I think all of us have emphasized the fact that we 

need to use a multiplicity of tools. We can’t just use one tool. 

CFIUS has a role to play. The Export Administration Act and the 

new legislation that’s been introduced has a role to play on export 

controls. 

A lot of the problems that you’re raising are ones that have to 

be addressed through traditional trade policy measures—things 

that are led by the U.S. Trade Representative’s office but where the 

White House, State Department, Commerce Department play important roles. 

Now, you know, solar panels—there’s been a decision that’s been 

taken under the authority of Section 201 of the Trade Act. 

Some of the issues related to pharmaceutical products also have 

been a key concern. We heard earlier about some of the concerns 

about intellectual property theft in Thailand and measures to get 

Thailand to do a better job of protecting against those things. 

There is a very focused effort—very quickly—on China and the 

Section 301 investigation that is currently underway to address 

those practices. 

43

So those are other tools that will address some of the concerns 

that you’re talking about, sir. 

Mr. SIRES. I just don’t know if we have the ability to get some 

of these countries to stop doing these things. I mean, what controls 

do we have? 

I mean, Thailand, for example, they don’t have much of an economy. I mean, do we want them to stop? How do we do that? 

I am sorry, Mr. Mancuso? 

Mr. MANCUSO. So I actually think, Congressman, it’s a very good 

question. The U.S. Government has different agencies that have 

those responsibilities. 

I think the world in which we—I mean, there are lots of problems. We can talk Thailand. We can talk China. But I think they’re 

all different. 

The U.S. Government has the capability and has the authority 

to do those things. But with respect to certain—both economic partners and strategic competitors like China, I think our game has to 

be better. It has to be more coordinated. 

And so it’s a legitimate question for Congress to ask in a specific 

way vis-a-vis this threat—are we configured—are we resourced to 

address this threat, and those are important questions to ask. 

I wish I had better answers. We can do it. I am not sure we are 

doing it well against the numbers—the various threats that we 

are——

Mr. SIRES. Can somebody address the pharmaceutical industry? 

Because that is very important to my state. 

Mr. WOLF. Yes, but not in the Export Administration Regulations. The subject of this bill and the regulations at issue couldn’t 

solve your problem but many other areas like 201, 301—yeah. No, 

I mean, it’s a legitimate issue but it’s not the subject or capable of 

being addressed by the Export Administration Regulations, which 

are focused on more traditional national security and foreign policy 

issues of the threat as opposed to the economic considerations at 

issue behind your question. These regulations don’t get to that 

point. 

Mr. SIRES. Right. I get it but do you have any regulations that 

get to it? Not you. How about——

Ambassador LARSON. Well, I think the key——

Mr. SIRES. I am specifically talking about Canada and the United 

States. Let me put it this way. 

Ambassador LARSON. Well, and so on Canada and the United 

States I think you raised an issue that must be at the heart of the 

NAFTA renegotiations that are underway right now and, certainly, 

the broad question of protection of intellectual property rights of 

companies like pharmaceutical companies that invest billions of 

dollars in developing new products lie at the heart of most of the 

trade negotiations that USTR leads on behalf of our Government. 

Mr. SIRES. Well, I just want to thank you. 

Thank you, Chairman. 

Mr. YOHO [presiding]. Thank you for the questions. 

Next, we’ll go to Ann Wagner from Missouri. 

Mrs. WAGNER. Thank you, Mr. Chairman, for hosting this important hearing. 

44

This issue is important to my district, as China has been looking 

to expand its footprint in the Midwest. Representatives from the 

Chinese consulate in Chicago spent the past year networking with 

Midwestern government offices including a stop in my district office and they stated that, and I quote, ‘‘Suspicion of Chinese foreign 

direct investment and excessive national security reviews would be 

bad for the bilateral relationship.’’

However, I was quick to remind them that failing to properly 

control our exports would be bad for America. 

I am committed to working with the committee to re-evaluate our 

export control regime to ensure that it is up to the challenge. And 

I thank you. 

Mr. Mancuso, I appreciate your insights on the Foreign Investment Risk Review Modernization Act, or FIRRMA. You noted that 

the bill encourages heightened engagement with our allies. 

The more closely we coordinate with foreign partners, the better 

our own export control regime will work. There is an opportunity 

here to expand the list of countries that participate in multilateral 

export control regimes, especially in Asia. 

For example, the U.S. has strong ties with Singapore and Malaysia, which have struggled to prevent controlled goods from making 

their way into North Korea and China. 

What, sir, can Congress do to help these countries become productive partners in our export control system? 

Mr. MANCUSO. Good morning, Congresswoman. So I will do my 

best to answer that question. 

First things first. I do think international trade and investment—foreign direct investment in most cases is overwhelmingly 

positive, including with respect to China. 

But I think we have to be very sober about those areas where 

it’s not. This is true for foreign investment. This is true for tech 

transfer export controls. 

In terms of the things this—our Government should do with respect to our partners and allies around the world, I would distinguish between treaty partners and treaty allies and partners. 

They’re all important. We value their relationships. They all contribute something. But treaty allies, I think, are special. 

With respect to those, I think the United States should engage 

in this kind of diplomacy to ensure that people—our colleagues understand our perspective. They may disagree and they’re entitled 

to disagree. They’re sovereign nations. 

But they should understand our perspective of why technology 

transfer is important and why the regulation of certain foreign investment is important. 

I would just point out in response that that some of our NATO 

allies are now considering either implementing or upgrading their 

CFIUS-like regimes. 

I think, if done well, that is a good thing. I think it is in the U.S. 

interests that our treaty partners have resilient economies and 

they have economies that support their national security interests 

as well, which tend to coincide with ours. 

Mrs. WAGNER. Both the United States and China are deeply 

aware that economic and national security can’t be separated, as 

we’ve stated here today at the hearing. 

45

Ambassador Larson, I am curious about how China might respond to FIRRMA. Can you give us a status update on Beijing’s 

foreign investment law? 

Also, what might the Chinese version of CFIUS look like and 

how would it affect our bilateral relationship? 

Ambassador LARSON. Well, thank you for the question. 

First of all, I’ve had a lot of conversations with the Chinese when 

I was in government and the role I have now, and the complaints 

about CFIUS and about export controls are sort of a persistent 

theme. 

And I’ve been a pretty strong, a very strong defender, actually, 

that the way that our Government in the United States has implemented CFIUS has been very targeted and has focused on those 

transactions that could present a threat to national security. 

And I will continue to take that position and I think that should 

be a position that will be embodied in the reforms that are contemplated in FIRRMA. 

China does have a national security law that affects investment 

in China right now. I don’t think it is implemented in as sophisticated way as CFIUS is administered. 

I think that it will be important when some of our Western allies 

implement national security-based investment laws as well because 

I think having a relatively common approach, whether it’s on export controls or on inward investment controls, is a strong point for 

us. When we can do that with our major allies, that’s important. 

I think we are just going to have a very candid set of conversations with China that start from the point that we understand that 

a two-way investment is good for both of our economies. 

We understand that we do depend on each other’s economies. But 

we will take the steps that we need to take to ensure that investment is not permitted or acquisitions are not permitted that impair 

our national security. 

So I think it’s a time where very candid conversations with 

China on the nature of our economic relationship—trade and investment—are going to be required to work out the problems that 

we have in the relationship. 

Mrs. WAGNER. Thank you very much. My time has expired. 

Mr. Chairman, I will submit the rest of my questions for the 

record. Thank you. 

Chairman ROYCE [presiding]. I thank the gentlelady. 

Tom Garrett of Virginia. 

Mr. GARRETT. Thank you, Mr. Chairman, and I would tip my 

hat, in his absence, to Senator Cornyn for working on this important legislation and to the chairman and ranking member of this 

committee. 

And I would point to a quote from someone I don’t quote that 

often, Vladimir Lenin, who said, ‘‘We will hang the capitalists with 

the rope that they sell us,’’ and I would submit that, anecdotally, 

as a young Army officer I heard a story of Q36 and Q37 Firefinder 

radars finding their way to China during the Clinton administration only to have American military Warrant Officers sent to help 

the Chinese put them back together I presume to reverse engineer 

them and those of us who knew what that counter battery radar 

allowed us to do wondered how the hell they got to China. 

46

Now, it’s anecdotal. It’s hearsay, as I would say in a later career. 

But I know this stuff happens. It blows my mind that Gen3 GPS 

signals were given to our enemies under President Clinton and 

have literally been used at the very least to take the lives of our 

allies. 

And I understand that there was much made about the transfer 

from the NTIA to ICANN of controls over the internet and some 

of it was hyperbolic and overstated but some of it wasn’t, and I 

wonder what the heck we are doing. 

So let me ask about FIRRMA and CFIUS as it relates to EB-5 

visas. Would the FIRRMA Act extend into the realm of the granting of EB-5 visas? 

Mr. Mancuso. 

Mr. MANCUSO. Congressman, I don’t think so. I would be surprised if they would. I don’t know. 

Mr. GARRETT. Does anybody at this table believe that that’s not 

the case? I believe that that’s the case, that you’re correct. 

Mr. WOLF. It does not. But in the export control system, there 

are prohibitions on what are called deemed exports, which are the 

released technologies to foreign persons in the United States regardless of the visa or other reasons they’re——

Mr. GARRETT. All right. Mr. Wolf, with all due respect, and I 

mean that——

Mr. WOLF. Yes. 

Mr. GARRETT [continuing]. I got a finite amount of time. 

Mr. WOLF. Okay. 

Mr. GARRETT. But so it doesn’t. 

Mr. WOLF. So no, but yes. 

Mr. GARRETT. And so might it make sense to extend some sort 

of congressional oversight and review to the EB-5 visa issuance 

process, Mr. Larson? 

Ambassador LARSON. I think that Congress can and should look 

at all things that it thinks could be important to——

Mr. GARRETT. And do you think it could be important to make 

sure that we are giving EB-5 visas to the right people who might 

not have dual-source technology at their fingertips by virtue of a 

permanent residence in the United States and a business that essentially manufactures what might be sensitive technology? Yes or 

no, please. 

Ambassador LARSON. I—if I were in the State Department I 

would not want to give a visa to someone that was coming to the 

United States for the purpose of stealing technology. 

Mr. GARRETT. So when the Washington Post—the Washington 

Post, noted conservative-leaning paper, right—that’s tongue in 

cheek—says that Virginia Governor Terry McAuliffe garnered special privilege in receiving EB-5 visas through the Department of 

Homeland Security under the Obama administration, we know that 

he lined his pockets. 

We know that GreenTech Automotive is now defunct and that 

the taxpayers of the state of Mississippi have lost millions of dollars. 

But to the extent that things like lithium ion batteries, which is 

undergird by the Chinese monopolization of the global cobalt markets, et cetera, can have dual uses, would not selling permanent 

47

residence to the United States potentially compromise technology 

that might be that proverbial rope that Lenin says they will buy 

from us to use to hang us, Mr. Mancuso? 

Mr. MANCUSO. The answer is that’s—let me answer this differently. I don’t think we should—I think citizenship is special. 

Citizenship goes to how you feel about your country and your commitment to your country. 

This is an existing program. I think it’s certainly something that 

this Congress could look at as part of a broader view of how we 

think about the U.S.’ engagement with the rest of the world. 

Mr. GARRETT. Again—and again, sincerely thank you all for 

being here. I intend absolutely no disrespect. I have a finite 

amount of time. 

EB-5 visas grant not citizenship but permanent residence under green card status for people who invest $500,000 in under developed areas or $1 million in developed areas of the United States 

to engage in the discourse of commerce. 

However, in 2014 I believe we granted just over 10,000 EB-5 

visas. I am not that good at math but 85 percent of them, or north 

of 8,500, were to Chinese nationals to engage in commerce on 

American soil wherein, I would presume, they would have lower 

barriers to entry as it related to obtaining technology that might 

have dual uses. 

Mr. Wolf, you’re nodding. 

Mr. WOLF. Yes, I agree you have a legitimate issue with that 

exact point for that reason. Just because they become a citizen 

through that process that their motives with respect to acquisition 

of dual-use technology should be part of the process. 

Mr. GARRETT. And so that’s something that you gentlemen would 

concur. And, again, I am out of time but I am going to ask real 

quickly, Mr. Chair, that we might ought to review as well in conjunction with CFIUS and the actual sending overseas of technology 

itself. 

Mr. MANCUSO. Absolutely. 

Mr. GARRETT. Thank you. Thank you, Mr. Chairman. 

Chairman ROYCE. Thank you very much, Tom. 

Let me just conclude our hearing here by thanking all three of 

our members of this panel for coming and testifying and also for 

giving us your insights on the pending legislation, and if none of 

you would mind, we’ll, of course, have some additional questions, 

as we move forward. 

So thank you very much, and we stand adjourned. 

[Whereupon, at 11:26 a.m., the committee was adjourned.] 

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