The House Select Committee on the Chinese Communist Party (CCP) held its third hearing on Wednesday, further exploring how to meet the challenges posed by China’s economic aggression.
Former U.S. Trade Representative (USTR) Robert Lighthizer returned to Capitol Hill on Wednesday night, and he came with a warning.
Lighthizer testified before the House Select Committee on the Chinese Communist Party (CCP) during a hearing that further examined how the United States can counter China’s economic aggression. Lighthizer was joined at the witness table by former Chairman of the Congressional U.S.-China Economic and Security Review Commission Roger Robinson and former Google CEO Eric Schmidt, who testified as to how America can sustain its role as an economic and innovation leader.
As Rep. Mike Gallagher (R-Wis.) alluded to in his opening remarks, questions over how America should navigate its relationship with China have dominated the news, with factions forming even within the Biden administration. However, few can question that the CCP aims to claim global supremacy, a mission that holds obvious serious ramifications for the United States.
“I believe that China is the most dangerous threat that we face as a nation. Indeed, it may be the most perilous adversary we’ve ever had,” Lighthizer said in his testimony. “China believes that it is destined to be the world’s only superpower and that we are in the way.”
A key component of that aim, Lighthizer outlined, is the CCP’s trade practices, such as currency manipulation, forced technology transfers and massive industrial policies.
“It is not an exaggeration to say that the Chinese Communist Party has been waging an economic war against the United States for decades,” Lighthizer said. “In this economic war, they use all the tools of classic mercantilism, plus many more. Their entire economic policy is designed to be an integral part of their overall strategy of global dominance. That policy produces huge trade surpluses and obtains technology by whatever means.”
This “economic war” has not only cost America its position in the global market, but also millions of valuable, family-supporting jobs. Between 2001 and 2018, the growing trade deficit with China was responsible for the elimination of 3.7 million jobs, with 75.4% of those losses in the manufacturing industry alone.
Under the Biden administration, landmark industrial policy like the Inflation Reduction Act and the CHIPS and Science Act has become law, catalyzing billions of dollars of private investment in American manufacturing. Since President Biden took office, America has seen more than 375,000 manufacturing jobs added.
The witnesses lauded America’s recent focus on industrial policy, but cautioned the committee that these efforts must be followed by more action.
“It’s a race, and those are steps in the race, but we’re not done,” Schmidt said. “There’s this notion that we somehow pass a law, we do the right thing, and we win. That’s not how it works. It’s a constant competition.”
Indeed, investment in the U.S. industrial base, while essential, must be only one half of America’s strategic response to the CCP’s economic threat. Trade action is needed to level the playing field for American workers.
Lighthizer called on the U.S. government to rebalance trade with China, expand export controls, and limit Chinese investment in the U.S. and outbound investment in China with the goal of a “strategic decoupling.”
Unsurprisingly, SHEIN and Temu also came under scrutiny during the hearing. The two Chinese fast fashion behemoths have notoriously exploited a loophole in U.S. customs law called de minimis, which allows foreign companies or individuals to ship goods directly to customers free of duties and inspection if the items are valued below $800.
Though arriving at a figure presents considerable challenge since so little is known about the value and contents of de minimis shipments, a new Coalition for a Prosperous America study estimates that China’s de minimis revenue reached $187.9 billion in 2022. Nonetheless, the study’s authors assert that they are confident that the estimate is conservative as they exclude “dozens or hundreds more companies that sell products online to U.S. consumers,” and the study’s total does not include all third-party sales revenue from Amazon and Walmart that account for so much of the companies’ e-commerce.
Originally intended to ease the burden of processing low-value imports for Customs and Border Protection officials, the de minimis threshold was first set for goods valued at $1 or less. In the 1990s, that threshold was raised to $200 and then elevated to $800 in 2016. E-commerce retailers have seized upon de minimis to their tremendous advantage in recent years.
“There are billion-dollar companies that exist solely because of this loophole,” Lighthizer said. “SHEIN, Temu — these are companies that literally would not exist except for this one little silly loophole, and they’re putting people out of work in stores. They’re putting people of work in manufacturing. So, to me, if you can’t repeal it entirely and go back to a really nominal amount, at least take it away for China and then take it away for any other country that you can prove transships from [China].”
Rep. Earl Blumenauer (D-Ore.) has introduced legislation to close the de minimis loophole by prohibiting goods from countries that are both non-market economies and on the USTR’s Priority Watch List from using de minimis.
The entire hearing is worth a watch. Watch it for yourself here.