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Washington, D.C.- House Foreign Affairs Committee Lead Republican Michael McCaul delivered the following opening statement at a full committee hearing on U.S. Economic Policy Response to Russia’s Invasion of Ukraine with Under Secretary of Commerce for Industry and Security, Bureau of Industry and Security (BIS).

 

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– Remarks as Delivered- 

“Thank you, Mr. Chairman, for holding this important hearing.

It’s been too long, this committee has not held a hearing on this subject for quite some time and its becoming very important issue. Thank you so much for holding this hearing today.

Mr. Estevez, thanks for appearing and I know we had a good meeting in my office a while back. And I look forward to your testimony.

As you know BIS has one of the most critical national security jobs within the United States government. This agency can stop the transfer of U.S. technology to our adversaries, who use it for military applications and human rights abuses. With a stroke of a pen, you sir, can constrain the Chinese Communist Party’s military and disrupt its surveillance state.

First, I’d like to discuss the Russian invasion of Ukraine. And while there is a narrative that the U.S. government has taken sweeping export control actions, I’m concerned the BIS failed to act during the 2008 Russian invasion of Georgia or the 2014 annexation of Crimea and the war in the Donbas region. It’s inexcusable we didn’t do more to stop Russia’s military modernization as Putin seeks to rebuild his Russian empire.

And even with stronger rules on Russian military end users I’m increasingly concerned about certain blind spots. The congressional research service warns that quote “the US government may not have sufficient visibly and access to enforce its controls on Russia through Chinas trade.” Last week the WSJ reported that Chinese firms are selling Russia goods its military needs to keep fighting in Ukraine.

When BIS had enforced its rule against the PRC companies that continue to support Russian military efforts. It only used a standard entity listing for such a serious violation there’s no denial order no foreign direct product rule and no sanctions. In short, BIS did as little as possible. In your testimony Mr. Estevez, you say BIS’ primary goal is to prevent malign actors from obtaining or diverting our technologies. Our top adversary is China under the leadership of the CCP, as the FBI director Christopher Wray recently explained, quote “there’s just no country that presents a broader threat to our ideas innovation and economic security then China.”

The CCP is blurring commercial and military distinctions to undermine a core tenet of U.S. export control regime that assumes there are clear distinction between military and civilian use. We recently witnessed a PRC hypersonic missile, a test where they fired a missile which circled the globe and landed with precision. This missile can also carry a nuclear warhead.

This was only possible through the U.S. technology that was sold to them from the United States. We gave it to them.

In fact, the Export Control Reform Act demands more aggressive control on countries like China, however, the numbers tell a different story. If you see the visual, CRS found that roughly $125 billion in US exports to China, there were over $125 billion in 2020 of US exports to China, out of that BIS required licenses for only 2% of exports. Only 2% of the 125 billion. Alarmingly 99% of controlled technologies went to China without a license, without being seen by BIS.

This is business as usual, and business as usual has to change. Despite an ongoing genocide and systematic program to divert private sector innovations to its military, dual use technology exports to China received little to no scrutiny.

The problem goes deeper. Our committee was given data that even when PRC companies are put onto the entities list, it’s not guaranteed that licenses will be denied. During a six-month period that spanned two administrations, that was provided to this committee from BIS, we found that BIS denied less than 1% of the license applications for Huawei and SMIC, approving license applications worth $100 billion dollars to Huawei and SMIC, which is China’s chip manufacturing company.

It’s clear that current policy and strategies are not working, and in fact after that initial document were turned over to the committee, we requested every three months an update and to date we have not received any updates since the first tranche of documents perhaps because it was quite revealing and maybe quite embarrassing.

BIS can no longer look the other way or rubber stamp licenses when companies are transferring sensitive technologies to the PRC. Moreover, BIS can no longer hide information from national security agencies or Congress and the American people. We are in a generational competition with a determined adversary. Your agency is tasked with the very important role. I believe you’ve waited too long to act against Russia and now we are seeing the results unfold in real time. We cannot make the same mistake with the CCP as their actions are increasingly hostile towards Taiwan in the South China Sea. So as our chief technology protection officer, sir, you must overhaul your agency before it is too late.

I believe its time, its time that all of us, including you sir, that we get to work on this, and I look forward to working with you, and with that I yield back.”

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