On January 10, 2023, the House of Representatives formed the United States House Select Committee on Strategic Competition between the United States and the Chinese Communist Party. The vote fulfilled a promise by House Republicans to form this special committee on China at the 118th Congress, which would focus on the enormous economic and military challenges the Chinese Communist Party (CCP) is posing to the US. While this was a GOP-driven effort, the bipartisan nature of the vote, 365-65, shows that Republicans and Democrats agree on the seriousness of the challenge from China. We monitor whether this bipartisanship persists through their hearings, committee actions, and legislative recommendations.
The establishment of this committee is just one pillar of many of the China-centric policy initiatives Congress will pursue over the next two years, but it should be among the most significant. Brownstein has the experience and connections to ensure all of these groups stay abreast of developments in US-Chinese politics as corporations prepare for a broad, China-centric agenda on Capitol Hill and in government .
Below is a summary of the information released about the committee so far and what that could mean once they begin their work.
membership
On December 8th, House Speaker Kevin McCarthy (R-CA) announced that Rep. Mike Gallagher (R-WI) would chair the special committee. Gallagher was a member of the China Task Force (CTF), a precursor to the committee formed by the GOP after Republicans and Democrats failed to reach a compromise on creating a China-focused committee in the previous congress. He is also a member of the House Permanent Select Committee on Intelligence (HPSCI) and the House Armed Services Committee (HASC). Gallagher, a Marine Corps intelligence officer twice deployed to Iraq and a former staffer on the Senate Foreign Relations Committee (SFRC), is widely regarded as a rising star within the House of Representatives GOP faction on national security issues. While Gallagher is known as a vocal China critic, given Gallagher’s track record of bipartisan cooperation on China-centric issues, Gallagher’s appointment is seen as a signal that McCarthy desires serious, bipartisan cooperation on the committee.
On Jan. 23, Speaker McCarthy named the other 12 House Republicans who will serve on the special committee: Reps. Rob Wittman (R-VA), Blaine Luetkemeyer (R-MO), Andy Barr (R-KY), Dan Newhouse (R-WA), John Moolenaar (R-WA), Darin LaHood (R-IL), Neal Dunn (R-FL), Jim Banks (R-IN), Dusty Johnson (R-SD), Michelle Steel (R-CA), Ashley Hinson (R-IA) and Carlos Gimenez (R-FL).
Collectively, these members represent a wide range of geographic backgrounds as well as the ideological spectrum of the conference; Some of them also hail from districts with notable agricultural and defense interests.
On the Democratic side, Rep. Raja Krishnamoorthi (D-IL) will serve as the senior member after beating Andy Kim (D-NJ) for the position. As a member of the House Oversight Committee, Krishnamoorthi is also a member of the House Permanent Select Committee on Intelligence. He has sponsored legislation in the past targeting China’s tech-sector policies, including co-sponsoring a bill with Gallagher that would ban TikTok nationwide.
Krishnamoorthi is joined on the committee by MPs Kim, Kathy Castor (D-FL), André Carson (D-IN), Seth Moulton (D-MA), Ro Khanna (D-CA), Mikie Sherrill (D-NJ) , Haley Stevens (D-MI), Jake Auchincloss (D-MA), Ritchie Torres (D-NY) and Shontel Brown (D-OH). The Democrats-elect are best known for being restrictive in their China policies, with Khanna, Moulton and Torres notorious for their bipartisan work on foreign policy affairs. Brown is the only committee member who voted against its creation, but she did not sign her Democratic peers’ Statement 23, which raises concerns about the committee spreading anti-Asian hatred.
committee priorities
With a view to the 118th Congress, Chairman Gallagher has set out his goals for the new committee in numerous interviews and comments. While it’s not yet clear what bills the committee will recommend or the House of Representatives will pass, issues are sure to arise.
Broadly speaking, we encourage the private sector to engage in difficult internal conversations about China and how prolonged deterioration in relations, sanctions or a Chinese conflict with Taiwan will affect their industries, supply chains and US national security.
Corporate America: A common theme is the focus on US business relations with China. Gallagher singled out companies like professional sports leagues, Hollywood and big banks. The regulatory catch is obvious here — and any company with deep economic ties to China should be aware of it — but the legislative path is less clear. Measures could range from a blunt tool like ending permanent, normal trade relations with China to more targeted export controls.
Outbound Investment Controls: One policy area where action certainly needs to be taken is the “Inverted Committee on Foreign Investments in the United States (CFIUS)” or foreign investment control. Leading legislative action in this area is bipartisan and led by Sens. Bob Casey (D-PA) and John Cornyn (R-TX). While this approach has the support of HFAC Chairman Michael McCaul (R-TX), it was opposed by the Financial Services and Ways and Means Judiciary Committees last Congress. This is a highly complex, controversial – and potentially highly economically disruptive – set of policies. It’s possible that the only action in this area will be a targeted outbound investment executive order from President Biden (expected in Q1 or Q2 2023) focused on components of advanced artificial intelligence and quantum computing.
supply chain: This wide range of issues could include incentives and disincentives for US companies. On the stimulus side, it will likely include macroeconomic policies such as doubling the research and development tax credit, as well as a discussion of industrial policies such as expanding the healthcare sector beyond tech/chips. Members have particularly focused on domestic production of personal protective equipment (PPE), APIs and antibiotics. Those policies could also include perverse incentives modeled on Chairman Gallagher’s bill that would ban the federal government from buying drugs with active ingredients made in China.
Other potential policy focuses include deepening military and economic ties with Taiwan, humanitarian sanctions over the treatment of Uyghurs, intellectual property (IP) theft and forced technology transfers, CCP influence in US think tanks and universities, countermeasures to China’s Belt and Road Initiative (BRI ) and data protection.
Upon his appointment, ranking member Krishnamoorthi said he was willing to work with the chairman on issues such as security threats, Taiwan and IP theft. He also nodded to the progressives who voted against the committee and said he would not support any measures that could be seen as xenophobic or target people of Asian descent.
Brownstein’s take
Chairman Gallagher and a large staff will make this a very serious exercise. Expecting more than rhetoric and investigation, they will pursue thoughtful and tough legislative initiatives and stand-alone bills or broader instruments like the National Defense Authorization Act (NDAA). Two recent case studies show fast-moving policy changes on which the committee could leave its fingerprints.
First, an example of how quickly laws related to China can move, the ban on TikTok from government phones went from a theoretical discussion to a legislative exercise with a unanimous Senate endorsement motion. Chairman Gallagher supports an outright ban on the app.
Second, a bipartisan consensus quickly formed on the recently passed HR 22 (331 votes to 97), which prohibits the Department of Energy (DOE) from selling special oil reserves to Chinese companies. This legislation was portrayed as a rebuke to President Biden by Republicans who proposed the legislation, and yet a majority of House Democrats voted in favor of it because voting against China-related legislation is currently bad policy. Of interest is whether this cross-gang collaboration will continue in the Senate, where the companion bill introduced on Jan. 23 (p.9) and requires a filibuster majority for passage.
The American public’s intensely negative view of China, shared by bipartisan and bicameral majorities in Congress, is likely to produce both legislation and oversight that will encompass most sectors of US industry and security.
If your company is concerned about these issues, we’d love to hear from you. For more information on how Brownstein can prepare organizations for ongoing changes in China-centric policies, please contact the authors of this alert.
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