The U.S.-China Economic and Security Review Commission is responsible for monitoring and investigating the bilateral trade relationship between the United States and the People’s Republic of China. The commission submits an annual report to Congress on the national security implications of this relationship, and it makes recommendations for possible legislative and administrative action. The commission directs its research in eight main areas, including weapons proliferation, economic transfers, energy, American capital markets, regional economic and security impacts, U.S.-China bilateral programs, World Trade Organization (WTO) compliance, and the implications of restrictions on speech and access to information in China.
The U.S.-China Economic and Security Review Commission was created on October 30, 2000, when the Floyd D. Spence National Defense Authorization Act was signed into law. This new commission absorbed the staff and facilities of the former US Trade Deficit Review Commission.
The originating legislation for the U.S.-China Economic and Security Review Commission was eventually amended several times. In 2002, the Treasury and General Government Appropriations Act made changes to the employment status of commission staff. In 2003, Division P of the “Consolidated Appropriations Resolution” changed the commission’s name, the terms of commissioners and responsibilities of the commission. In 2005, a regulation changed the responsibilities of the commission and the applicability of the Federal Advisory Committee Act. And in 2008, another rule change altered the annual report date from June to December.
The U.S.-China Economic and Security Review Commission is charged with monitoring and investigating the United States’ bilateral trade relationship with the People’s Republic of China. Each year, the commission submits a report to Congress, outlining any national security issues raised by the economic relationship between China and America. The report makes recommendations, where appropriate, for future legislative and administrative action.
Legislation passed on November 22, 2005, amended the responsibilities of the commission to focus in eight main areas, including proliferation practices, economic transfers, energy, American capital markets, regional economic and security impacts, U.S.-China bilateral programs, WTO compliance, and the implications of restrictions on speech and access to information in China.
The commission is comprised of 12 members, three of whom are selected by each majority and minority leader of the Senate, and the speaker and the minority leader of the House. Each commissioner serves a two-year term.
Commissioners receive support from a staff of professional and administrative staff with extensive backgrounds in trade, economics, weapons proliferation, foreign policy, and U.S.-China relations. Some are fluent or proficient in Chinese (Mandarin) and most have significant prior working and traveling experience in China and Taiwan. The staff is headed by Michael R. Danis, Commission Executive Director.
Dennis C. Shea, Chairman
Government and public policy attorney, former director of policy for the Bob Dole for President Campaign, deputy chief of staff to Senator Elizabeth Dole, and Assistant Secretary for Policy Development and Research at the Department of Housing and Urban Development. Reappointed by Senate Minority Leader Mitch McConnell (R-Kentucky) for a second two-year term expiring December 31, 2012.
William A. Reinsch, Vice Chairman
President of the National Foreign Trade Council; former Under Secretary of Commerce for Export Administration; former legislative assistant to Senator John Heinz (R-Pennsylvania) and Senator John D. Rockefeller, IV (D-West Virginia). Reappointed by Senate Democratic Leader Harry Reid for a seventh term expiring December 31, 2013.
Michael R. Danis, Executive Director
Formerly served as a senior intelligence officer with the Defense Intelligence Agency, where he managed the agency’s technology transfer division. He also established and led a team of China technology specialists producing assessments on China’s military-industrial complex. While serving in the U.S. Air Force, he was twice temporarily assigned to the office of the defense attaché in Beijing.
Daniel M. Slane
Founder and co-owner of the Slane Company with extensive international business experience. Slane was reappointed to the commission by House Minority Leader John Boehner (R-Ohio) for a third two-year term that expires on December 31, 2013. Slane was chairman of the commission in 2010 and vice chairman in 2011.
Former chief of staff, counsel, legislative director, and foreign policy adviser to House Speaker Nancy Pelosi; former staff member on the House Permanent Select Committee on Intelligence. Reappointed by Pelosi on December 23, 2011, for a sixth two-year term expiring December 31, 2013. Bartholomew served as the commission chairman for the 2007 and 2009 report cycles, and served as vice chairman for the 2006, 2008, and 2010 cycles.
Daniel A. Blumenthal
Director of Asian studies and senior resident fellow at the American Enterprise Institute for Public Policy Research. Previously, Blumenthal was senior director for China, Taiwan, and Mongolia in the Office of the Under Secretary of Defense for International Security Affairs during the first George W. Bush administration. Reappointed by Senate Republican Leader Mitch McConnell for a fourth two-year term expiring December 31, 2013. Previously served as vice chairman for the 2007 report cycle.
Larry M. Wortzel
Former director of the Asian Studies Center and vice president for foreign policy at the Heritage Foundation; former director of the Strategic Studies Institute of the U.S. Army War College; former Army Attaché at the American Embassy in China. Reappointed for a sixth term expiring December 31, 2012. Unanimously approved as commission chairman for the 2008 Report Cycle, he previously served as the commission chairman for the 2006 report cycle.
Served as counselor to the President of the World Bank; associate director at the White House Office of Management and Budget; and in variety of positions for U.S. Senator Mitch McConnell including the Senate Intelligence, Foreign Relations and Appropriations Committees. Reappointed by Senate Republican Leader Mitch McConnell for a second two-year term expiring December 31, 2012.
C. Richard D’Amato
Former delegate to the General Assembly in Maryland, and a former Captain in the U.S. Navy. Also served as Counsel for the U.S. Senate Appropriations Committee. Served as commissioner from 2001 to 2007 and served as chairman and vice chairman of the Commission from April 2001 through December 2005. Reappointed by Senate Majority Leader Harry Reid for a two-year term expiring December 31, 2012.
Jeffrey L. Fiedler
Assistant to the General President and Director, Special Projects and Initiatives for the International Union of Operating Engineers. Previously he was President of Research Associates of America, a non-profit labor research organization, and the elected president of the Food and Allied Service Trade Department, AFL-CIO (“FAST”). Reappointed by House Speaker Nancy Pelosi on December 23, 2011, for a fourth term expiring December 31, 2013.
Michael R. Wessel
President of The Wessel Group Inc.; former Counsel to Congressman Richard A. Gephardt (D-Missouri). Currently serves as a member on the board of directors of the Goodyear Tire and Rubber Co. Reappointed by House Speaker Nancy Pelosi (D-California) for a sixth term expiring December 31, 2012.
An attorney with the Goodwin & Goodwin LLP law firm; appointed by West Virginia Governor Joe Manchin to the U.S. Senate to temporarily fill the vacancy caused by the passing of Senator Robert C. Byrd. He also,chaired the West Virginia Independent Commission on Judicial Reform. Appointed by Senate Majority Leader Harry Reid on January 1, 2012, for a two-year term expiring December 31, 2013.
From the Web Site of the U.S.-China Economic and Security Review Commission
The U.S.-China Economic and Security Review Commission does not award grants or contracts and is not listed on USASpending.gov. The $3.5 million budget is currently spent on support and administrative staff, as well as the associate director’s salary, travel, and office and communications expenses.
Increasing Chinese Ownership of U.S. Debt
Over the past decade, the U.S.-China Economic and Security Review Commission has heard testimony from numerous experts on the status of trade and economic relations between these two superpowers. But perhaps the most alarmist-sounding issue raised on the American side has been the growing ownership of the U.S. foreign debt by the Chinese.
More than $1 trillion in U.S. securities are controlled by China, a consequence of the U.S. government running multi-billion-dollar deficits year after year and having to borrow from overseas. This staggering figure has left experts and politicians wringing their hands, fearing the ownership of so much debt stands to give the Chinese leverage over Washington if Beijing finds itself disagreeing with U.S. foreign policy positions.
By 2011, China was the single largest holder of the U.S. debt. But this began to change from 2011 to 2012. Despite experiencing a horrendous earthquake in 2011, Japan surprised many experts and began purchasing more U.S. securities. Economists had expected the Japanese to do just the opposite, what with so much to repair following the disaster.
From June 2011 to February 2012, banks and other entities in Japan increased their holdings of U.S. securities from $881.6 billion to $1.0959 trillion. At the same time, the Chinese decreased their holdings of U.S. securities from $1.307 trillion to $1.1789 trillion.
As a result, China went from owning $425.4 billion more in U.S. government debt than the Japanese in 2011 to only having $83 billion more as of early 2012. If this trend continues in 2012, Japan would once again become the largest holder of America’s debt, experts said.
The U.S.-China Economic Relationship: Shifts and Twists in the Balance of Power (Brookings Institution)
Testimony before the U.S.-China Economic and Security Review Commission (Paul Saulski, Georgetown University Law Center)
Japan on Track to Overtake China as Top Foreign Owner of U.S. Debt (by Terence P. Jeffrey, CNS News)
Commission Gets Hacked
The U.S.-China Economic and Security Review Commission has been the focus of computer hacking stories involving American satellites and the commission’s own equipment.
In 2011, the commission issued a report about two U.S. satellites that were interfered with by hackers who may have been from China.
According to the commission’s report, a U.S. Geological Survey satellite experienced interference in October 2007 and July 2008. Another satellite, operated by the National Aeronautics and Space Administration, received interference for two minutes in June 2008 and for nine minutes in October 2008. Both satellites were used to track Earth’s climate and terrain.
Commission experts said the hackers gained access to the satellites through ground control systems at the Svalbard Satellite Station in Spitsbergen, Norway. The attackers gained enough access on one occasion that they could have taken control of one of the satellites, but chose not to do so.
In 2012, the Daily Mail reported, the commission itself may have been the victim of computers hackers from India. The Federal Bureau of Investigation was called in to investigate whether an Indian-government spy unit hacked into the commission’s email system. Commission members’ own emails between October and November 2011 may have been compromised by hackers using mobile phone technologies.
Chinese Military Hackers Blamed for Attacking Two U.S. Satellites (by Fahmida Y. Rashid, eWeek)
Chinese Hackers Blamed For US Satellite Attack (Tech Week Europe)
Report: Chinese Military Suspected in Hacks of U.S. Government Satellites (by Carl Franzen, TPM)
Hacktivist 'Hardcore Charlie' Claims China Military Hack (by Phil Muncaster, The Register)
China-Iran Ties Are Problematic for U.S.
Washington’s efforts to isolate Iran, mitigate its influence in the Middle East, and squelch its nuclear weapons ambition have been complicated by China.
As a superpower, China has sought to counterbalance American foreign policy and interfere with U.S. strategic objectives. This is especially true with American efforts vis-à-vis Iran. Beijing has continued to sell weapons to Iran, as well as maintain extensive trade relations with it, and even go so far as to protect the Iranian regime at the United Nations Security Council.
“All of these activities have contributed to the ineffectiveness of Washington’s policies toward Iran,” wrote Michael Mazza at Iran Tracker in April 2011. “Although Chinese support for the Iranian regime has certainly frustrated American leaders, it has not harmed U.S.-China relations. China has offered Iran as much support as it can get away with without bringing reprisals upon itself.”
The U.S. does have supporters in its attempts to control Iran. Its allies in Europe agree that sanctions need to be maintained against Tehran. But getting full cooperation from European players can be difficult, and this may limit whatever influence London, France, or Berlin can exert on China.
China-Iran Ties: Assessment and Implications for U.S. Policy (by Michael Mazza, Iran Tracker)
Research Report on China-Iran Relations (U.S.-China Economic and Security Review Commission)
Commission Lashes Out at China over “Deceptive” Economic Practices
The U.S.-China Economic and Security Review Commission stirred controversy when it released a 2010 report accusing China of manipulating its currency and continuing to practice exclusionary trade policies to the detriment of the United States.
The commission said the currency manipulation has harmed American manufacturing and employment by artificially lowering the yuan’s value, making Chinese exports very affordable. At the same time, China has made it difficult for U.S. exports to be competitive among Chinese consumers.
China says it must keep its currency strong to maintain a healthy economy and social stability.
The report to Congress recommended lawmakers should urge the Obama administration to take action against China’s currency policy and overcome its trade barriers.
China Manipulates Currency, U.S. Panel Says (by Ben Rooney, CNN Money)
US Panel Lashes Out At China (Al Jazeera)
Testimony Congressman Peter J. Visclosky (U.S.-China Economic and Security Review Commission)
USCC Chairman Speech Transcript On China State Enterprises (by Michael Stumo, Economy in Crisis)
Trade with China
Before leaving office, President Bill Clinton signed legislation normalizing trade relations with China. The move was expected to open up China’s enormous market of one-billion-plus consumers to U.S. businesses of all sizes.
But within a few years, the U.S. trade deficit with China expanded. Some large American multinationals like Boeing, Caterpillar, and Cargill benefited from expanding trade opportunities with the Chinese. Boeing made out because of China’s fast-growing commercial aviation market, while the country’s boom in construction required Caterpillar’s heavy machinery. And feeding more than a billion people meant opportunities for Cargill to export farm products, like soybeans, as well as fertilizer and chemicals.
These corporations proved to be the exception rather than the rule for American businesses hoping to make money off the Chinese. Those selling smaller, consumer-oriented goods have not successfully cracked markets in China, thanks to a combination of factors: “discriminatory rules, burdensome red tape, language difficulties, and a population that earns only a fraction of what U.S. consumers make,” according to Frontline.
By 2010, the U.S.-China trade deficit reached a record high of $273 billion. The imbalance with China represented 50% of America’s total trade deficit with the world.
U.S. Trade with China: Expectations vs. Reality (by Ned Barker, Frontline)
2011 Report to Congress (U.S.-China Economic and Security Review Commission) (pdf)
Assessment of Chinese Missile Capabilities and Threat
A 2010 report prepared for the U.S.-China Economic and Security Review Commission warned that China’s military now is capable of launching missile attacks on key American bases in the western Pacific. The document stated that at least five U.S. Air Force bases in South Korea and Japan are now within reach of Chinese short- and medium-range missiles.
This potential threat could “inhibit” U.S. military operations in the region, according to the report. The bases mentioned were at Osan and Kunsan in South Korea, and Kadena, Misawa, and Yokota in Japan, all of which are within 680 miles of China.
The commission’s report suggested the Department of Defense may want to fortify the bases from Chinese attack by expanding missile defenses, early-warning systems, taking care of runway repairs, and hardening buildings and hangars.
These changes could benefit defense contractors that make missile defense and electronic warfare systems, such as Lockheed Martin, Raytheon, and Northrop Grumman.
Chinese Missiles Could Close U.S. Bases In Attack, Report Says (by Tony Capaccio, Bloomberg News)
Testimony before the U.S.-China Economic and Security Review Commission Hearing on ―Developments in China‘s Cyber and Nuclear Capabilities (Dr. Phillip C. Saunders Director, Center for the Study of Chinese Military Affairs, Institute for National Strategic Studies, National Defense University)
China’s Evolving Space Capabilities: Implications For U.S. Interests (by Mark Stokes and Dean Cheng, Project 2049 Institute) (pdf)
Chinese Cyberattacks on the U.S. Are on the Rise
The U.S.-China Economic and Security Review Commission warned in 2009 of rising cyberattacks from China.
In a report to Congress, the commission warned the Chinese military was preparing ways to disrupt American transportation and logistics networks if the country ever went to war with the U.S.
In addition to conducting cyberwarfare exercises, China had advanced its capabilities in computer network operations to “sufficiently to pose genuine risk to U.S. military operations in the event of a conflict,” the report stated. Lockheed Martin’s F-35 program was hacked in 2009, for example, and the main suspect was China.
Dennis Shea, the commission chairman, noted that the U.S. was suffering “from continual cyber operations sanctioned or tolerated by the Chinese government.”
The report stated the number of cyberattacks against the U.S. government had increased “sharply” in 2009, and many of the attacks are coming from Chinese state and state-sponsored entities. In the first half of that year, the military spent more than $100 million just repairing network damage caused by cyberattacks.
Hackers in 2008 attempted 54,640 infiltrations against the Department of Defense (DoD). By the first half of the following year alone, there were 43,785 cyber incidents targeting the Pentagon. By October 2011, that year was on pace to see more than 55,000 hacking attacks on the DoD.
Chinese Military Hackers Blamed for Attacking Two U.S. Satellites (by Fahmida Y. Rashid, eWeek)
China Testing Cyber-Attack Capabilities, Report Says (by Ellen Nakashima, Washington Post)
Report: Cyberattacks Against the U.S. "Rising Sharply" (by Angela Moscaritolo, SC Magazine)
Report to Congress (U.S.-China Economic and Security Review Commission)
China Expands Cyberspying in U.S., Report Says (by Siobhan Gorman, Wall Street Journal)
China Cyber Espionage Threatens U.S., Report Says (by Thomas Claburn, InformationWeek)
Google Confronts China’s “Three Warfares” (by Timothy L. Thomas, Parameters)
U.S. Is Still Said to be Ahead of China in Science/Technology Innovation (For Now)
When it comes to technology innovation, China is still in the United States’ rearview. But it would be wise for American leaders to keep an eye on the rising Asian giant, according to experts.
In testimony before the U.S.-China Economic and Security Review Commission, Dieter Ernst, an economist with the East-West Center, said China’s innovation policies are not a threat yet to U.S. leadership in science and technology.
Ernst told the commission that the U.S. is still ahead in overall innovative capacity, “and China still has a long way to go to close the innovation gap.”
But the Chinese are taking steps to try and catch the U.S., according to Ernst. The country has increased R&D spending about 10% each year since 2000, resulting in China’s share of global R&D spending increasing from 9.1% in 2008 to 12.3% in 2010.
During this same period, the U.S. share dipped from 35.4% to 34.4%, Ernst noted.
China also has ramped up its patent activity, and has passed up Europe and South Korea in terms of total patents being issued domestically. But it still has a long ways to go, Ernst said, citing the fact that China owns only 2% of worldwide patents.
Another expert, Rob Atkinson, president of the Information Technology and Innovation Foundation, also told the commission that China has made a strategic decision to become a high-tech economy.
“While there is a broad consensus among experts on what China is trying to do, there is considerably less consensus over whether China will be successful and whether America should be concerned. . . . The bottom line is that America ignores China’s innovation policies and growing innovation capability at its own peril,” said Atkinson.
Testimony before the U.S.-China Economic and Security Review Commission (by Robert D. Atkinson, The Information Technology & Innovation Foundation) (pdf)
University of Maryland Professor Warns of Dangers from Sovereign Wealth Funds
In February 2008, Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business, warned the commission against sovereign wealth funds like the China Investment Corporation (CIC), which could have the capacity to influence important U.S. investment decisions. These decisions included the choice of location of major production facilities in the United States or abroad, the location of R&D facilities, and the structure of investments by U.S. firms that may compete with companies domiciled in the home countries of sovereign wealth funds. Morici wondered why the U.S. would permit a foreign sovereign fund to invest in U.S. companies and wield influence when it does not permit the U.S. Social Security fund to do the same.
Investments by Sovereign Wealth Funds in the United States (by Peter Morici, University of Maryland)
U.S. critics uneasy about China's investment goals (by Rachelle Younglai and Jim Wolf, Reuters)
Report Reveals Chinese Threat to U.S. Technology
In 2007, the U.S.-China Economic and Security Review Commission reported that Chinese spying in America is the leading threat to American technology, especially through cyber attacks. The report recommended that lawmakers finance counterintelligence efforts to stop the Chinese from stealing U.S. technology and manufacturing expertise, and it called for the U.S. to work closely with China to promote energy security and deal with environmental problems such as climate change and pollution.
Report: China spies threaten U.S. technology (Associated Press)
U.S. panel urges vigilance on China spying, cyber war (by Paul Eckert, Reuters)
U.S. Targets Weapons Technology Theft (by Jason Ryan, Pierre Thomas, Jack Date and Theresa Cook, ABC News)
New Computers a Threat to National Security
In March 2006, members of the U.S.-China Economic and Security Review Commission reportedly voiced concerns that Lenovo's involvement in a $13 million contract to upgrade the commission’s computers was a threat to national security. Lenovo is a Chinese computer maker that had recently purchased IBM’s personal computer business. Lenovo rejected the claims, saying the commission had fully investigated the company’s operations before awarding the contract.
Lenovo rejects security concerns over U.S. gov't contract (by Sumner Lemon, IDG News Service)
William A. Reinsch 2011
Daniel M. Slane 2010
Carolyn Bartholomew 2009
Larry M. Wortzel 2008
Carolyn Bartholomew 2007
Larry M. Wortzel 2006
C. Richard D’Amato 2001-2006
A member of the U.S.-China Economic and Security Review Commission since its inception in 2001, William A. Reinsch was first appointed by Democratic Senate Minority Leader Tom Daschle, and most recently reappointed to the commission by Senate Democratic Leader Harry Reid. His term expires December 31, 2011, and he currently serves as chairman of the commission.
The US-China Economic and Security Review Commission (USCC) is one of the few federal agencies housed in the legislative branch. Responsible for monitoring and investigating the bilateral trade relationship between the United States and the People’s Republic of China, USCC submits an annual report to Congress on the national security implications of this relationship, and it makes recommendations for possible legislative and administrative action. The commission is comprised of 12 members, three of whom are selected by each Majority and Minority leader of the Senate, and the Speaker and the Minority leader of the House. Each commissioner serves a two-year term.