At the confirmation hearing yesterday for the Biden administration's nominee for Ambassador to China, long-time diplomat Nicholas Burns, trade issues came up several times. Burns mentioned these issues in his opening statement, and then offered more detail in response to questions from Senators John Barrasso (R-WY), Tim Kaine (D-VA), and Todd Young (R-IN).
In his opening statement, Burns said, "[w]e also must hold the PRC accountable for failing to play by the rules on trade and investment, including its thefts of intellectual property, use of state subsidies, dumping of goods, and unfair labor practices. These actions harm American workers and businesses."
In the questions from the Senators, key issues that came up were: Enforcement of the Phase One agreement's purchase commitments; protection of intellectual property; the grant of permanent normal trade relations to China in 2000; and the connection of technology issues to national security. Burns seemed to support the current Biden administration trade policy as set out by U.S. Trade Representative Katherine Tai, but also noted that "I hope there will be bipartisan support for a very aggressive American policy to hold China to account."
The transcript of the exchanges on these issues is as follows.
Senator Barrasso: I want to ask about the US-China phase one agreement. Remember in January of 2020, the United States and China signed a phase one trade agreement. China committed to buy $468 billion of US goods, energy, agriculture and services over a two year period of time. ... China appears to be failing to comply to this agreement. Reports indicate that China's purchases have fallen far short for both 2020 and 2021. Do you believe China is committed to abiding by its promises under this agreement, and what are our options available to us to ensure that China does fulfill the terms of the agreement?
Nicholas Burns: Thank you Senator, this is going to be a contentious issue and it has been for a long time between our two countries. I think you know that the US Trade Representative, Ambassador Katherine Tai, gave a speech here in Washington, two and a half weeks ago, and she was very forthright in saying, I'll just summarize ... her main point, saying that she would talk to her Chinese counterpart about that phase one deal, and about the performance of the Chinese government in meeting or not meeting its commitments. And I think she was right to suggest that that has to be the first order of business on trade with China. ... but I think she was right to start there, hold China to account for what it promised President Trump. And I think most observers and experts would say they have not fulfilled their obligations.
Senator Barrasso: In addition to goods and energy and agricultural products, there's also intellectual property obligations under this US-China phase one agreement. What steps can we take to ensure that China fully implements and complies with the intellectual property.
Nicholas Burns: So that's a key issue, because it gets to the systemic violations of China's WTO commitments. I named some of them in my statement: intellectual property theft, dumping, state subsidies, unfair labor practices. So when we talk to the Chinese about trade, part of it is our two way $559 billion trade relationship, in goods and then more in services. Part of it is getting at these systemic problems that I think every recent president has wrestled the Chinese on.
Senator Kaine: Pre-2000, China had to sort of make a case to the United States every year to be granted most favored nation status, and it was an annual decision that the President would make. That annual decision provided a forum for discussions about human rights issues and such. In 2000, Congress granted China permanent normal trade relations status, which paved their path to becoming a member of the WTO, so we no longer have that annual determination and opportunity and I think possibly we've lost some focus on some of the human rights and other issues for that reason. The decision was made because of a belief that if China was part of the WTO, they would conform themselves to global trade rules, and I think everyone, whatever their thought at the time, would say that China's behavior has been disappointing that they haven't done what we hoped. I'm curious, do you think that was a mistake, for us to grant China legal permanent trade relations in 2000?
Nicholas Burns: Thank you Senator Kaine. I was not involved in US-China relations at that time. I was focused on Greece and NATO in those years. And of course it's always perilous to be a Monday morning quarterback and sit in judgment of people I really admire. But personally, the assumptions that many made about China in those years turned out not to be accurate. China took advantage of its presence in the WTO as a so called developing country. China then didn't meet its obligations under the WTO, and who suffered? American workers and American businesses, and you and I have met with a lot of American businesses who had their IP ripped off by the Chinese, and made their major business decisions very difficult. So I do think at this point in 2021, I hope there will be bipartisan support for a very aggressive American policy to hold China to account, and if you read Ambassador Tai's speech of two and a half weeks ago, ... she was very clear about her determination on behalf of the President to protect American workers and protect American businesses, and I think that has to be the focus of our efforts right now.
Senator Young: My state of Indiana, Ambassador, is the most manufacturing intensive state in the United States and our businesses rely on a diversified supply chain and market access. Over the years, China has used localization requirements, intellectual property theft and forced transfer of data to hamstring our enterprises that are dependent on technology. I firmly believe the United States should advocate for integrity and digital trade provisions of our trade agreements. This includes holding bad actors accountable, especially Communist China. I'm currently working on a resolution to solidify the US commitment to high standard digital trade principles. If confirmed, how will you address continued action by China that purposely causes harm to American businesses, knowing that you'll need to coordinate with Ambassador Tai on this.
Nicholas Burns: Senator, thank you. In my opening statement, I focused on this issue of trade, because of the enormous damage to your state and every other state, to our workers, and to our businesses. This is a high priority for the Biden administration and obviously, if confirmed, I'll be working very intensively on this issue with the White House, with the Commerce Department, the Treasury Department, of course, principally with Ambassador Tai and her colleagues.
Senator Young: Ambassador, accept my apologies if you discussed this in your opening statement, but could you just explain why actions like IP theft and and data localization requirements are issues of national security and not just economic issues.
Nicholas Burns: In thinking about this job I've been consulting with a lot of experts on China across the country and it's really been interesting to hear that I think the great majority of them would say that the focal point, the most important part of our competition with China, will be on economics and technology in the future. We're going to have a military competition for power, which we had with the Soviets in the old Cold War. What distinguishes our competition with China, what makes ... it unlike the old Cold War, is the fact that they seek dominance on technology, on AI and machine learning, quantum sciences biotechnology. They seek to militarize those technologies. That may be the central focus of the competition. So therefore we in the executive branch and in Congress need to unite on a bipartisan basis and be fundamentally focused on it.