On April 8, Senate Foreign Relations Committee Chairman Bob Menendez (D-NJ) and Ranking Member Jim Risch (R-ID) announced a bipartisan agreement on a wide-ranging strategic approach towards China. The Strategic Competition Act of 2021 addresses economic competition with China, as well as humanitarian, national security, and democracy-related issues. Most significantly, the bill, if enacted, stands to significantly impact U.S. trade with China and other partners.
Notably, the bill – scheduled to be marked up by the committee on April 21 – seeks to shore up the competitiveness of U.S. companies operating in China by:
- Promoting diverse global supply chains. Section 101 directs the Secretary of State, with the Secretary of Commerce, to help U.S. persons and companies to move supply chains outside of China and identify alternative markets.
In addition, the bill requires U.S. agencies to gather information and monitor Chinese anti-competitive practices and violations of U.S. law by:
- Tracking intellectual property (“IP”) violations by Chinese state-owned enterprises (“SOEs”). Section 402 directs the Secretary of State, in coordination with other agencies, to publish an annual list of SOEs that have either stolen U.S. companies’ IP or forced technology transfer. The list will also describe, without disclosing IP or trade secrets, the economic advantage obtained by the SOE.
- Reporting on Chinese subsidies. Section 403 requires the Secretary of State, in coordination with the U.S. Trade Representative and Secretary of Commerce, to publish a list of all subsidies provided by the Chinese government to Chinese enterprises and identify how that treatment discriminates against foreign market participants. Subsidies to be included extend beyond the traditional definition in the WTO Agreement on Subsidies and Countervailing Measures; the list encompasses measures and policies that shield SOEs from competition.
- Monitoring the use of Hong Kong to circumvent U.S. export controls. Section 406 directs the Secretary of State to report on the extent to which China uses Hong Kong to get around U.S. restrictions placed on certain exports.
The bill also penalizes Chinese officials for their involvement in Uyghur forced labor by:
- Imposing sanctions with respect to human rights violations in Xinjiang. Sections 302 and 303 would extend the reach of the Uyghur Human Rights Policy Act, passed last year, by allowing the U.S. government to impose economic sanctions against Chinese officials for their involvement in Uyghur forced labor and other abuses.
Finally, the bill aims to enhance U.S. relationships with trading partners through new trade agreements on, for example, digital services; renewed participation in various international organizations; and, investing in global infrastructure, like 5G mobile networks and undersea cables.
The Strategic Competition Act is one component of a larger, bipartisan legislative effort being championed by Senate Majority Leader Schumer (D-NY) to “outcompete China and create new America jobs.” Earlier this year, Schumer directed eight relevant Senate committees to begin drafting the broader China bill, with the bipartisan Endless Frontier Act (which invests in ten key technology areas, including semiconductors, AI and machine learning, and advanced energy technology) – itself the subject of an April 14 Senate Commerce Committee hearing – as its centerpiece. The comprehensive legislation could be on the Senate floor later this spring.
The Kelley Drye trade team will be actively monitoring the bill and providing updates. Should you have any questions, please contact the authors.