any time that c-span shop. c-span now is available at the apple store and google play, scan the qr code to download it for free today or visit our website c-span.org/c-span now. c-span now, your front-row seat to washington any time, anywhere. and now to a hearing on current and emerging technologies

affecting u.s.-china competition. the u.s.-china economic and security review commission examined the risks of certain chinese technologies being used in the united states including the chinese communist party's ability to access user data collected from the social media app tiktok, other topics include electric vehicle production and the use of artificial intelligence and quantum commuting by china's military

>> and ai diplomacy in the indo pacific region. ms. wong will discuss the trends in china's commercial ai industry as well as the key

institutions driving china's ai developments. she's a new voice here for the commission and thank you. next we will hear from dr. michelle rosso. dr. rosso was previously director of technology and national security at the national security council. she will testify in china's progress and various sub fields of china's technology industry including agriculture, pharmaceuticals and more. this is her first time appearing here. thank you. lastly we will doctor from dr. jeb, senior vice president of government relations. previously served as former deputy assistant secretary of defense for industrial policy in the trump administration. he will address china's battery development including industrial and ev batteries and the risks

associated with their presence in u.s. military and critical infrastructure systems. this is his first time appearing before us as well and appreciate all of the new voices we are getting today. thank you all very much for your testimony. i'll ask all of our witnesses topless keep remarks to 7 minutes to reserve time for questions and answers. ms. luogn, we will begin with you. >> i will begin my statement with landscape followed by internal and external factors impacting china's ai ability to

innovate. and conclude recommendations for u.s. policymakers for u.s. and china competition for artificial competition. the plc has semipa thesed ai essential to ambition to become a technology superpower and it has called on both government and privateer sector actors to support the goal. china's ambition to the leap-frog the united states compose challenges to the united states. china's progress in commercial ai applications can also support its military monitorization goals. in my written testimony i discuss multiple mechanism that is the prc has used to increase capital support for ai. this include r&d funding, subsidies, public and private equity the investments. today i want to focus on government guidance funds. the chinese government uses these funds to mobilize both public and private capital in order to achieve two goals, one generate financial return and

two, further industrial policy goals. this has allowed government to do direct investments to strategically important industries. my research shows that the government is involved across multiple funding stages, investment in company especially in emerging technologies can be really risky and the chinese government sets up guidance funds in order to contribute the first 20 to 30% of capital. in theory, this initial investment can aattract private investors who may not have the appetite to find high-risk, high-reward sectors lake ai, but in practice these investments often state-owned enterprises and state-run banks and once deployed, these guided funds are operated by management institutions that are established by government agencies or state-owned investment firms. guidance firms are one of the government's tools to maintain

close ties between public and private sectors. when the chinese government takes up chairs in a nonstate ai company it can exercise control over that company the prc has put a lot of stock? capacity to find innovations and

there are other internal factors impacting china's ability to innovate in ai and other emerging technologies. these include demographic changes, shortages and the evolving regulatory environment. of the 3 factors i'm going to focus on china's ai governing efforts. the efforts are led by the cyberspace administration of china and launched 3ai regulation policies one focusing on recommendation algorithms and the other on ai. however, excessive regulation can stifle innovation. chinese companies are concerned of compliance costs. but it is too early to judge the full impact of china's ai regulations on the country's ability to innovate and to

develop technology ecosystem. beyond that, there are also external factors that impact china's ai innovation. for one u.s. export controls on computing chips and related semiconductor manufacturing equipment may hinder china's ability to train language models that demand high-computing power. another is the u.s. 2023 investment and went to private and capital investment in china, although the scopes and restriction to companies that are mainly doing -- mainly engaged in ai systems that are for military purposes the impact can extend beyond that. it is possible that with more limited access the u.s. experts and networks, these companies may have difficulty finding investors to fund their visions. such measures are intended to restrict chinese access to u.s.

technologies and know how capital markets and to really ensure policy effectiveness i recommend the following 3 actions which i also discuss in detail in my written testimony. first, u.s. policymakers need accurate evidence-based assessment of china's technological power to regularly track and update china's ai capability and impact on u.s. competitiveness. for instance, create open-source intelligence center can help understanding of china's s&t capabilities. second to restrict u.s. capitol and aiding the development of china's ai use for military purposes the u.s. should scope programs headed by the department of treasury and this means the scope of the end use prohibited transaction as well as implementing entity-approach as well for the restriction. third, the united states cannot do this alone. government efforts to align with

allies at the level but further specific actions are needed. for instance, information sharing with key u.s. allies such as transactions of concern can really make coordination efforts more effective and could avoid overextending u.s. jurisdiction. thank you again for the opportunity to testify today and i look forward to your questions. >> thank you, appreciate it. dr. rosso. >> thank you so much. thank you for inviting me to testify about u.s.-china competitiveness and biotechnology and i'm delighted to be here to share the work that we are currently undertaking at the national security commission on emerging biotech, we just released interim report and encourage everyone to check it out at

biotech.senate.com. i studied stem cells in my graduate work and infectious diseases before serving in government and i along with my fellow commission members and academic and former government officials are currently examining the opportunities and challenges facing the united states at the critical intersection of national security and emerging biotechnology. one of the challenges we are finding is the risk of being overmatched by china. with recent advances and biotechnology we are beginning to be able to program cells like we program computers and the applications here go far beyond the pharmaceutical domain. these technologies can be applied across our economy to agriculture, to energy, to industrial production, manufacturing and, of course, defense and military application. the ccp is keenly aware of the potential here and are investing heavily across the domains. losing ground but we still have time, we haven't yet hit the

chat gpt moment for this technology. we can see it coming, though, and the race is on. continued u.s. leadership cannot guarantied and we arere seeing indicators that china is catching up and in some critical field surpassing us. created well beforewh the recent advances in large language models. this was by design. congress intended that the ai commission provide contacts and policy options to legislators before it was too late. and similarly congress has recognized that we are almost to an inflection point with biotechnology the and formed our commission accordingly. so as i mentioned we just completed our first year of work and delivered interim reports after engaging with hundreds of stakeholders and this report lays out our plan for the year s ahead. so some of what we found so far, there areat significant road blocks in the united states that could harm our ability to reach that chat gpt moment, if you

will. it still takes too long and cost far more than it should to prove biotech product from lab to market. the workforce require to operate it and regulatory improvements are knees along-side advances and technologies. in contrast the ccp is making serious investments and true policy decisions that could putted it on track to outtake us. governments have invested billions of dollars in the sector by system account a hundred billion dollars. they're employing a familiar playbook, hauwei playbook, if you will. state-supported enterprises, and this top-down approach may serve china well in biotech race. could allow them to overcome the barriers confronting progress in the united states.

so one example where this chinese strategy may be already paying dividend is the critical intersection. ai is revolutionizing biotechnology and it is likely that the future chat gpt moment for the field will be because of the convergence between the two technologies. i will say that the chinese system may be better oriented toward the aibionexus than ours. they've established biomedical clusters, researchers and companies. they recognize ai models depend on good quality and large-scale data sets and established large scale databases including the chinese bank, hosting tens of biological samples. and have benefited from talent coming t back from u.s. universities and the u.s. national institute of health and both ai and biotech have been

major priorities for programs. the policies are paying off. they are leading-edge chinese players and industry. for example, biomap cofounded by the owner bidu has developed model to hit a hundred billion parameters according to online marketing. they call this the largest of its kind. in contrast we have not yet prioritize the intersection at a national level. another example of biotech in action is support for bgi or the hauwei of dna sequencing. this may provide china with advantages in the sub field and associated biological data because forse biotech data truly is the new oil. the ccp supports bgi, for example,nd 1.5 billion ten-year loan in 2010 led to growth to a multinational company and bg

operates with other organizations. makes sense and bgi can provide this thanks in part to large subsidies. these unfair economic practices could position bgi to drive competitors out of the market and with data security laws that requirecu chinese companies like bgi to share data with the government and publicize partnership with the chinese military u.s. biological call data mayay be fueling economic priorities. so i just shared two examples that demonstrate china is using familiar tactics to try to win out in biotech. unlike the sectors that came before, 5g, we have time to act beforeh. we maybe surpassed ands we lay in interim report there are policy options that we are considering to addresst challenges to the biotech progress that exist in the uniteded states including how to prepare the u.s. government for the age of biology and how to protect against the technologies

misused. we will provide our formal recommendations and our final report in december 2024 and i look forward to the discussion today in answering your questions. >> appreciate this opportunity to speak about building chinese resistant battery supply chains of the united states. in march 2021i returned to the private sector after serving as deputy assistant, i saw significant indeed alarming vulnerabilities of the united states vis-a-vis china in several industrial sectors, crucial to readiness and capability of the u.s.he militay and america's overall economic and overall security. these included semiconductors andct advanced batteries.

here we are talking about the most technically mid-size batteries need today operate not just automobiles but distributed weapon systems such as satellite, uav's, i can go on. some 3 years later the u.s. government over two administrations through thent executive and legislative branches have act today remediate some of these u.s. vulnerabilities concerning battery technologies, components and materials. now one might quibble about the particular but collectively they constitute a series of steps in the right direction. nonetheless, fundamental american weaknesses remain and will continue for w advanced batteries. andr that is our dependence in some cases directly and in most cases indirectly on china for crucial phases of the battery supply chain and that start with

minerally extracts, moves to processing, i can't stress processing enough and then ends after numerous stages with a fully integrated battery. i bring your attention to the data that i brought here today figures 1 to 6 showing intensely rising u.s. import from china of lithium and batteries, battery parts and battery cells. the one positive trend is emergence of korea as hefty exporter in addition to china of battery parts, however, i say that the korea are positive. the situation is the same or worst for allays japan, germany and taiwan all of whom supply us with battery components. finally, many of the spleuchans of which the federal government draws have huge underlying

chinese dependencies, even when the known supplier, the company that is being contracted with seems fine and headquartered in the u.s. or ally in japan or france still the underlying dependency is china. this stems from cycles of experience and expertise which has no substitute. several u.s. firms with promising battery technologies existed around a decade and a half ago, however, federal incentives dried up, permitting obstacles which i will speak about more later remain unabated. failed to counter predatory chinese trade practices and subsidies and the ev market was

too small. ino recent years bipartisan concern has grown. and useful to break the battery supply chain from up stream through mid streamat to down stream for our purposes. most u.s. public attention on batteries aims to reslice slices of the mid stream and down stream of battery manufacturing. the mid stream includes the production of you take chinese source and turn them into cells and chinese source cathos and turn to modules. fabricating cells and modules and integrating the facts into a finished battery. with boost in state and federal incentives over the last few a number ofe seen battery cell plants in the united states. however, growing domestic battery manufacturing industry is misleading. essential parts of the battery of sub components of materials that originate in china

recognizing that realistically we cannot do everything at twoness secure this entire vital supply chain. -- this is thecritical but neglp stream. i could go on. many the mid stream chinese entities dominate not to believe production of anodes, but also the inverters, foils, binders and cooling equipment that are essential to turning anodes into cells. the number of companies in the

world that have mastered these processes are relatively few. most are chinese. all involve intricate manufacturing, are all capital intensive. nonetheless, these are considered low value andnd cameo dominate us over the last few decades. lithium batteries without owning those phases of the process. as the u.s. has learned another crucial industrial sector just because a particular item of material is cheaply produced or extracted elsewhere does not mean that we do not need some level of domestic capacity. we certainly don't think about energy that way. the u.s. department of defense faces the same battery supply chain challenges and vulnerabilities as the private sector but with vastly added complications and concerns. the u.s. military shift towards distribute operations, vehicles, nglong duration, uncrude systems

above air, on the ground, water, electronic warfare and large constellation of satellites have swelled demand for batteries. yet with micro electronic the military tinny share of domestic battery demand limit power to supply chain. the dod is far, far from being 1% consumer of the battery market in the united states. it is just a tad more than 0%. addressing the national battery problem commercial offense requires speed and above all scale, we need a sense of wartime urgency like we did with apolo space program and trying to focus on export investment controls will not suffice. today it is astonishingly difficult in the u.s. and some of our allies to break the all important processing sector and it is impossible to compete

solely on course. mineral process is energy intensive and involve strong chemicals and potentially produce hazardous web base. building new environmental facility is possible today, but it will cost several hundred million dollars in some cases more than a billion. and that's if the construction is even allowed. the permitting regulation associated with the national environmental policy act nipa which govern the building of just about anything of anyny sie in this country affectively serve as automatic break if not a barrier to building a complete domestic supply chain for advanced batteries. i commend the work of noah smith a nonpartisan economic analyst who has written extensively on nia and describes predicament. that is a well-constructed

tariff, tax credits for capital expenditures and channeling ununrealized capital gains in the battery sector. we need to impose that tariff even on friendly trading countries so they h not be pass-throws, if they adopt the same tariff we do, we can waive the tariff. the goal is not to create a tariff block against our allies but rather against china. >> if you could finish up. >> yes, sir. >> we will get back tos the recommendations and questions and answers as well. >> unlike direct incentives and i want to stress this, tax incentives keep pivotal decisions in the hands of

entrepreneurs and there needs to be reform of nipa. finally i want to state that many assumptions about pollution are based on data assumption 5 decades ago and what was a dirty process can be a clean one today. and the department of defense needs if it wants specific military battery it's going to have to put real dollars behind contracts so in short, we have outsourced whole industries including the battery industry. it will take years to unwind vulnerabilities but there are things we can do very quickly to reverse the situation. thank you, sir. >> thank you. commissioner cleveland. >> i think i'm going to wait around. >> commissioner freeburg. >> thank you, thanks to all our witnesses for their excellent testimony. dr. rozo if i could start with you, you talk about situation

and the kinds of prescriptions that you point to are also similar to those that we heard on the one handd things that build up our own capacity to do things and on the other measures that if they don't slow china down at least limit the ability that they have to extract from our system things that allow them to move forward. i wanted to ask you about that half of the equation and if you could say more about that because it seemed like the recommendation that is you made pointed to two things, one data and the other talent for lack of a better o term. do you think that u.s. laws should be changed so that scientists here can't participate in foreign talents particularly in the biotech data and on data should there be regulations or laws prohibit use of chinese companies processing genetic data or storing that

information? >> yeah, thank you commissionera for the question. i will note that on both of those topics our commission has not had developed and endorsed policy recommendations on either of those topics so i can share some of what we are seeing in terms of overall statements but we will stop shortly of offering recommendations in either of those areas so, yeah, to your original point there's a lot of similarities that we are seeing with biotech and with other sectors. ecsome notable differences a lot of biotech is still in a researching phase. it is an r&d heavy enterprise, so when you compare it to other fields like semiconductors or others that are more established and where some of the policies have been applied before that is one distinction of it still being in the lab, if you will. so, you know, options around talent and data may still -- may apply in a different way for the biotech sector than it does for other elements.

in terms of the checkpoints we are looking as you t mentioned o kinds of options there's the duality here, either we can run faster or we can slow competitors down and so again we are still looking at what -- how those recommendations may take place and what options are but, you know, there are policies proposals on the table already hein congress about limiting the ability for federal funds to be used to support chinese providers of critical enablers of the biotech industry like geneticen sequencing. >> you mentioned that chinese were taking advantage of openness of precompetitive research that's going on. isn't that by its nature publicly available information? is it possible to restrict that? it seems in this area there's a lot going on that essentially basic science? >> sure, so a couple of

distinctions. bank i referenceds a closed facility. we have some information around how many samples there are and what information is there but that's not accessible outside of china to researchers. in contrast, the u.s. equivalent and certainly in other parts of the world, these sort of biological databases are open and researchers can access them, innovators can access them so that is a distinction between these systems where the chinese enterprise is not subscribing to open research. and the type of information they're collecting which could come from the united states is not freely available the same as ours is. >> what might be the options for dealing with that imbalance? >> what might be options for dealing >> yeah, so potential options for dealing with that are looking at data flows. we do not have a position on this particular issue butpa i wl sayy that in my personal capaciy

i don't know that we can or i would want to completely subscribe to the chinas model, locking this down, it's looking at how do you make the data accessible but secure s is a runr option, but if we can create and build out bigger databases to rival what the chinese system may have, does it create sort of a situation where there trev of data becomes less important if we have something that rivals us. >> accessible but secure would be accessible to those participating? >> it could be accessible to those participating and there could be different elements of different data sets that are accessible by certain researchers. secure also cybersecure so you can understand the integrity of those data sets is critically important. >> not generally available to anyone? >> again, we don't have a position on this right now. there are different ways one could go about doing this. as you rightfully say, when you

talk about research data, it becomes very different than when you're talking about data that relates to intellectual property. >> thank you. commissioner glass? >> i just had a follow-up on commissioner freedberg's question because i don't know the field but in terms of genetic sequencing. do we have knowledge to what extent the chinese actually have genetic sequencing information from the united states, people who participated in various studdies? i'm trying to understand the open data can you walk me through that? >> again, we don't have the information of what exists in the chinese gem bank but have information the number of sequences and is probably

outdated and is looking at genetic sequences from plants, animals, microorganisms which is helpful to understand what types of products can be made. there have been examples of how the u.s. health insurance, anthem 2015 hack of which information was stolen including identification numbers, names, social security numbers, so there's anecdotal evidence of some of this but in terms of a comprehensive assessment of what exists in chinese biological databases, what is u.s. information is something we don't have access to. >> it just strikes me in this age where people are constantly getting solicitations on social media to do d.n.a. for ancestry.com and whatnot, to what extent do the chinese potentially have access to that data? >> that's right. and to that, to the point of the previous commissioner, and i mentioned cybersecurity, there's

a list that is needed to access this type of information. one could be chinese service providers collecting it. another could be just hacking into the u.s. databases. >> doesn't b.g.i. own 23 and ancestry.com, doesn't a chinese company own the largest collector of genetic data in this country, i thought. >> i didn't know that. >> i don't know the ownership of b.g.i. and the relationship there but it's a complex web of, you know, business entanglements. >> in your future work we had a recommendation two years ago, mike, i can't remember where we strongly recommended there be transparency both in advertising and ownership because it is i think the largest collector of ancestry data is a chinese owned data. it's not marketed as that. >> and i do want to commend the

commission for your long history of work on biotech and china. you're one of the first or the first to talk about the strategic domain so appreciate the long history of the work of this commission on the topic. >> and just, i think i have two minutes left but dr. nadiner, appreciated your comments, and of course i'm in full agreement with what you're saying, given your experience, do you think we've really invested in the right things in terms of the sequencing of our investments? meaning there's a lot -- there's been a lot of prioritization on producing the finished product potentially more finished product here. have we done these kinds of investments the right way? i know you're talking about trade remedies and safeguards and things like that but from your perspective, you know, are these investments being done

appropriately to ensure longevity of the investment? >> i think that question is right on point because this is a wider american trend over four to five decades. if it involves a lot of capital expenditures and the profit is lower -- i'm not saying it's not a good profit but if the profit is lower, then we say ok let other countries, in the past few decades, let china assume those capital ventures. and because of shareholder value and the way the tax system works, we're very much biased towards industries like financial services and software which don't often have the same capital expenditures you'd have in terms of mineral processing. so the profit is greater and hence we like to focus on the

end product, the integration of certain manufactured goods but i think that's a problem fundamentally and it's a problem of incentives in the economy. it's not a question of just preaching to people but if we gave the right tax incentives, there would be no reason for companies and entrepreneurs to not jump on them. >> co-chair helberg. >> thank you. and thank you to our witnesses for their insightful testimonies. how old is china's e.v. industry? >> i cannot give you an exact date but they've been working on e.v.'s for at least 30 years, and mostly -- early on it was mostly still in technology from the u.s. >> is it a established fact that china's e.v. makers now rank as the number one exporters in the

world? >> china has reached that status from all the data i've seen. >> you almost recently made news stating the chinese e.v. makers would destroy the western industry without tariffs on china e.v.'s, do you agree with that? >> 110%. >> do you support tariffs on chinese e.v.'s? >> yes i do and also component parts. we have a huge auto domestic industry as do the italians and japanese and french and if we do not protect the lower level suppliers, they'll simply not be able to compete against chinese subsidies. >> ms. rozo, do you believe biowarfare should be viewed by the u.s. government as a standard war fighting domain and national security issue and how vulnerable are we to a bioattack in light of recent advances in biotechnology? >> yeah, thank you for the question. so i think in terms of the second half, we saw the response

to covid-19 and sort of the ability of our system to respect and respond to individuals was presented by biotech and saw an ability to get to a vaccine in a shorter time than before and the ability to create new threats but by no means would anyone say we are prepared for what is coming. and in terms of how technology is changing that landscape, we've actually, as our commission just put out a couple papers on the intersection of a.i. and bio, where we look at the applications of large language models to biotechnology and how that's changing the threat landscape. so in particular, the distinctions between large language models trained on human information like chat g.d.p. and biological design tools. so in our findings, it's the latter, the sort of a.i. model trains on biological information that has the potential to create

novel biological agents in the future. we don't assess that capacity is something that is robust today, still takes a lot of expertise to use these systems but is something we should be mindful of as we're developing these tools and put guardrails in place. >> it's my understanding that it's now technically possible to develop pathogens that are explicitly targeted at individuals with a specific genetic profile or specific groups with a genetic profile, is that true? >> i've not seen that's technically possible. >> can you help us understand a little bit if china views biotech as a national security issue or priority as part of their policy planning? >> sure. i think it's clear china views biotech as an economic and national security priority. they of course have a stated goal of civil monetary fusion so

any technology received from commercial entities will be used for military advantage and military advantage with respect to biotech could mean many different things. it could look like weaponnization of biotech in ways that don't align with our system and also could look like enhanced supply chains and critical capabilities provided by -- for the military biotechnology. >> do you believe the u.s. government should explore and consider the feasibility, need, and desirability of establishing a new defensive bioforce at the department of homeland security to protect our homeland against potential bioattacks from our adversaries? >> as part of the commission i don't have a specific viewpoint on that. i will note our commission is particularly focused on biotech. our mandate is not necessarily biodefense but we are looking at biodefense where it relates to advances in those technologies. >> ok. but to clarify, you do believe

biotechnology has serious implications for national security? >> of course, yes. >> and are you able to comment on the biolabs uncovered in california? >> no, sorry, i'm not tracking that. >> the chinese biolabs were -- illegal chinese biolabs were recently covered in california with thousands of mice pathogens ranging from h.i.v. to covid to a lot of different strains. is that something you were aware of. >> no, i'm not. >> vice chair price? >> first of all, thank you all for your testimony today. this has been very interesting. ms. long, i want to go back to your secretary recommendation and for you to flush it out

more, specifically the changes you're suggesting from exclusively used to intended and exact why. could you talk about that a little more. >> yes, absolutely. thank for you the question. i have spent a lot of time thinking about the definition of a.i. system is and i think at least according to the treasury, the definition of a.i. system is quite broad and the policy objective here is to restrict investments coming from the united states to china but the a.i. systems used for military purposes and the language of that emplm is to state for exclusively military useful purposes. according to my research, it's quite difficult to delineate the difference between military purpose -- an a.i. system that is exclusively used for military purposes because there is a

profit motivation behind that as well. when an a.i. developer looks at a product on commercial space, they do want to create a adjustable foundational basis that could be fine-tuned for many purposes for commercial uses and military uses. it's quite difficult to capture transactions that are going towards a.i. companies exclusively developing products for military purposes. if we widen the language to intend in part useful military purposes, we can capture the a.i. system that could potentially be transforming between military space to civilian space and vice versa. >> thank you. mr. nadaner, we cut you off a little bit when you got to the point on your recommendations. i think you got most of it in

but is there anything else you want to expand on in two minutes? >> for the nepa permitting process, the process should be limited to six months and then appeals of three months each. and then we have to curtail injunction abuse. this is an abuse of the courts. by ending private party lawsuits, instead the suing party should remain with our elected representatives and the states and localities. >> thank you. >> commissioner shriver? >> thank you to our witnesses for your excellent statements and contributions here today. ms. long, i wanted to start with you and also the same recommendation that commissioner price asked you about. your recommendation to restrict capital investment in the areas of a.i. for military purposes, is that just the right thing to do or would that actually have an impact?

what magnitude or percentage are they relying on u.s. capital because you described a very heavy investment on the chinese state. >> thank you. in my research when i look at the extent and scope and size of u.s. capital flowing to china's a.i. development, it's really small. u.s. investors are not dominant investors in china and actually domestic investors and that's a quite common thing in the private investment world, similar in the u.s., u.s. investors are dominant investors in our ecosystem. that being said, there are other components that are quite important that the u.s. spends to bring to china, including not just the actual money itself but the intentional benefits that come along with the capital. and i think that's the one component that is concerning to a lot of policymakers here in d.c. because the expertise and the networks and the managerial

opportunity for these investors, that they are bringing to china is helping the chinese fund the capital ecosystem maturing. it's a bigger ecosystem than the united states and that's a important component. that said, the military part is quite small because it's merely -- again, it's difficult to differentiate different applications of a.i., which is the fund space and the commercial space. in china because of the civil fusion policy that can be transformed easily between the commercial space and military space and i actually have to caveat that by "easily" there's an effort or pathway for that to happen but when you adopt a system for a.i. space it has to

be fine-tuned for military purposes. it won't take a long time for the chinese government to figure out how to do that more effectively and there's a ton of problems with the policy as well. >> mr. nadaner, you concluded your statement it will take years to unwind this. can you take your best stab at it, what does wild success look for us if you adopted some of these measures, tariffs and investment incentives, what's the magnitude of this? >> it's a large magnitude but we've shown the ability to do significant things when we allow ourselves to do it. i would say if we adopted those -- let's say by the end of this year we adopted the tariffs, the tax credits for large capital expenditures for batteries and then followed along the lines of senator tim scott and cory booker on capital gains, freeing them up for investment, i think within 10

years we would be in very good shape. but if we go very slowly and allow nepa to continue its operations, we'll find that 40 years will go by with nothing. >> so wild success is 10 years. >> pretty good in the manufacturing business. >> dr. rozo, i wanted to ask you about a different wild success. what if the chinese are wildly successful on the investment and research and development side, particularly this nexus you explained between a.i. and biotech. we had conversation earlier about the threat and risk is abstract and therefore people aren't moving with the sense of urgency. i'm grateful your organization exists and working on these problems but we grapple with what does worst case look like, what does chinese wild success look like?

>> thank you for the question. i think it's multifacet and we talked about the potential for misuse of biotechnology and what that would look like if an adversary has different ethics and values around using technology and what that would mean. there are human as he can't pictures of this technology we have to -- aspects of this technology we have to grapple with and how mastery could impact the supply chains and how it might affect our relationship with china. the medical implications of biotech is well understood and we think pharmaceuticals but on the supply chain side this is a growing part of the biotech sector, really using biomanufacturing to create novel roots of production of critical chemicals. an example of what b.c.g. has accomplished is a chemical called b.d.o., a chemical now

derived from petroleum and is a $5 billion for this chemical and is water bottled in front of me. this right now is mainly manufactured in china but there's a u.s. firm that used synthetic biology to create a cell factor that can produce biobased b.d.o. and they're building a facility in iowa to make this bioversion of this chemical. so bringing the supply chain back from china, creating jobs in iowa and using corn as the starting material is a great new story and the potential of how many parts of our supply chain we can do that for, we're really just beginning to scratch the surface of that. but this is an area where the market may not exist today for products. if we're replacing products in our supply chain that are already very cheap, the market may not be there today. so it's an area where we see that china may have an advantage

with state down policies and incentives for manufacturing infrastructure for industrial manufacturing they could outperform us at this sector that is still advancing so it's something to be mindful of and is an area we're particularly viewing as something with absent action we may fall behind because the market doesn't exist for these type of products. >> let me start with you, dr. rozo and try to keep some of the responses short so we can get through these. it appears to us in the synthetic biotech that your comment about a chat e.b.t. moment it seems there's more capital constraint in the sector over the last couple months that

what was, and very appreciative to what you've done throughout your career and serving on this commission but the inflection point here in the u.s. seems to be a little farther down the road. what do you attribute that to? >> i think exactly as you say, the markets look very different today than they did a few years ago, so borrowing money is expensive right now and for an industry like biotech where it's still relatively expensive to do the r&d and get a product from lab to market, there are certain factors we accept that economic cost like in high value pharmaceuticals and the margins will bear out the cost of development but right now for the industrial products or products for the ag sector the same costs still exist today but the margins are not there for the products. so it creates an imbalance and

we're seeing more capital flowing towards medical products with high margins than some of these industrial applications. don't get me wrong, the cost will come down as technologies increase but the funding cycle we are right now with the markets being like they are impact some other than others. >> i seem to remember and i could be corrected later but i think senators grassley and ernest had spoken out about amino acids and other biotech products produced in china, many of them food additives and i think vitamin k and others that are necessary for the strength of our livestock, our food supply. what visibility do you have in that from the commission and what are you doing, is that accurate and it seems we are

putting ourselves and the potential for china to be able to relationshippize -- to weaponnize those products for what is a critical need here. >> i appreciate the question and i just described, biotech can help us creating more resilient supply chains but can be used to entrench the supply chains we have vis-a-vis the united states and china. by and large we don't have great visibility to biotech supply chains whether it be medical or agriculture and am feeling a sense of -- what's the word? jealousy at my colleague talking about great detail the battery supply chain and different sectors and how well defined that is. but on the biotech side it's not there in terms of what are the critical inputs, the raw materials, the reagents, the consumables, where those come from and where they exist, the visibility is not there and it becomes very difficult to make policy decisions. if you'll allow me one extra detail here, the way our system

classifies biotech with the way that we count biotech industry in what we call make codes does not apply to biotech because it can be used in industry and pharmaceutical we don't have ways of measuring our own economy with respect to biotech. it becomes very difficult to make policy decisions without understanding where we are and without understanding where china is. we're looking at ways to improve our own economic accounting if that's something the commission is interested we're happy to chat further on that. >> we've looked in the past about accounting and data acquisition and certainly looking at redefinition of the nix codes which is in the department of commerce and something within their jurisdiction and does does not require new statutory authority and something will take under advisement.

mr. nadaner, i appreciate everything you're saying and is spot on and i wanted to go to a different component of the battery supply chain and not the commodities, the cobalt, etc., but the technologies embedded in there. there was a recent report that the authorities, camp lejeune indicated to the local authorities they could not put load balancing batteries from source in china as part of the reserve power system. and there have been increasing questions about the security of these larger batteries, not that the same isn't true of an e.v. or tesla auto. but with the drive towards green energy and load balancing

batteries, whether at the industrial facility or on the grid itself are increasingly important and i've raised other issues today. it sounds like we're allowing preplaced chinese emissions on the u.s. homeland because these batteries are all remeetly -- remotely maintained, serviced, accessed. what been the technology sphere do you think we need to be doing about the battery supplies that we are not doing presently? >> these are remote vehicles for our destruction. they're embedded with electronics that be used for a variety of purposes. the battery in many ways are chemicals with wires and sensors and semi conductors included but

the chemicals can be highly explosive. and that just takes a little bit of computer code to change. i think in terms of those kinds of electronics that get embedded in particularly larger, more complex batteries, that's something we can make but there still has -- no one is going to make it unless the batteries are also made here. it has to be something that goes in. >> ok. thank you. commissioner cleveland? >> i want to thank you all for your testimony. it's extremely helpful. i have one question for dr. rozo. you talk about the potential of withholding biofuel advancements from the u.s. military. can you talk more about that? it's in your written testimony. page 9.

my page 9. in talking about that there is an increasing consolidation in the ag biotech space and i'm curious what do you see is the threat or the risk there? >> sure. i think broadly, the acquisition of singenta by kim china and the ongoing combining of assets with synokim is concerning because this supply chain and this agriculture biotech is winnowing. the number of companies which used to be much larger and represents a lot more countries is now much smaller and that's a concerning trend. we wanted to note, also, that the purchase of kim china was

just to point to the differing views or view points what constitutes national security concerns. we made recommendations around increasing the visibility of national security at the usda as part of ongoing work related to the farm bill. in looking at the agency and the ability of individuals to participate in security conversations is not of course what it is in other national security agencies. and how it could impact our military and our sector. but it's clear that syngenta has the best information on seeds grown here in the united states and that potential information could be used against us. it's a point of taking into account not only the basic

biotech sector but also all the economic sectors which it applies to. >> i want to raise with you a number of obvious objections and see how you would respond. first would be the question of the impact of this tariff that you advocate on u.s. consumers and producers who are incorporating -- currently incorporating products that are made with these important components. that's one. the second related question is the impact of stiffer tariffs and tax credits that you propose on our relations with our allies. we've been through this with the i.r.a. and this sounds like it could be the same thing.

how would you respond based on those concerns? >> i think as a country you cannot have pass-throughs from friends. it's not a very friendly act. and they have a similar problem to us. we can solve the problem together but we certainly can't suffer the problem alone. we can't be just a great sponge. so i think, i believe if we put the tariffs in the right place and have the right diplomacy and the right diplomacy that dr. kissinger and dr. schultz did years ago, it's very intense and laborious, but to put in place the right kinds of agreements, you could have a joint tariff. among allies. then we would all benefit. in terms of consumer costs, i think currently the situation right now is a very bad deal for average americans if not in the

upper class. we don't have these industries anymore or middle class jobs. we have communities that are bereft of manufacturing to an unhealthy extent, so i believe that if we had a revival of industry that would be far better than getting a cheaper battery but not having a job and not having a community. >> can we solve this by ourselves on our own or will this necessarily require a high level of cooperation from our allies? >> i believe it would be extraordinarily difficult for us to do this alone. with allies it's imminently possible because as we've seen, korea, japan have extraordinary technologies and we benefit when they come here.

and germany has great chemical ability and france is doing some very nice things on batteries. so to do this together will be much more easier than to do it alone. someone has to take the first step. right now the easy situation is for u.s. to be the great absorbent. >> thank you. >> can i add one point if that's ok. i did spend time looking at the chinese e.v. industry and it seems to me that they not only are exporting to the u.s. but they also mostly exporting to europe. so a potential tariff on chinese to the united states might leave it behind in the competition sphere. that's just one point. and also half of tesla's e.v.'s manufactured in china in its

factory is also going to europe. that could be convoluted in the export data that's reported publicly. >> thank you. >> commissioner glass? >> i will pass. >> co-chair albert? >> no further questions. >> well, i'm going to come back to me then it sounds like. which is fine. dr. rozo, you mentioned the kim china. i was going back to the b.g.i. that was complete genomics in 2012. do you think that the -- those that serve on the committee now have a better appreciation for some of the risks in this area?

i think the work you did at the n.s.c. and the creation of this commission is partially a sign of that. are you in your discussions at the commission aware of greater sensitivity? >> yeah, thank for you the question. i think by and large when we're looking at the government and we have a suite of work around biolit asy and how we improve the understanding of biology in the federal government, we need more individuals out of all agencies who have more familiarity with biotechnology. being one of those individuals for some time before i stepped out of government, kid say there are great, really intelligent scientists working in the government but there's not many of them. and they're not at high enough roles within the government. and so whether it's sifius and without specific individuals in the room that understand biotech

and understand the complexities with this technology, it becomes difficult to inform these discussions. so we're looking at ways to improve what we're calling >> another question is when one looks at biotechnology -- and we did a hearing and commissioner cleveland and i did it four years ago with your co-chair and others, we talked about fermentation capacity and building blocks to be able to convert the ideas to industry-level production. what's the state of the industry, china certainly claimed our clock when they took

over everything from penicillin to other fer mentation approaches. >> it is something i am concerned but when we look at the medical sector we have a lot more information, the facilities have to be approved by bioregulatory bodies and products have to be approved. and the majority highlight the products exist in the u.s. and e.u., low-value products. on the industrial sector, the understanding is much less, but i will say and certainly in response to imbalancees that exist in industrial manufacturing capacity, the administration has just put out yesterday r.f.p. for increasing industrial biomanufacturing capacity in the united states. that is in the early stages but

for industry that is a welcomed development a support in supporting biomanufacturing capacity. a it's an area we don't have good analytic data. but there is support on the industrial side and they have large public companies that aren't using these engineering techniques but fer mentation is an old manufacturing science. and they will have an advantage over ours. companies are facing difficult decisions between financing their own facilities or paying high fees to contract out that capacity. we had a funding program yesterday which we advocated for and we are in support of increasing that capacity in the

united states. >> question for you, on page four of your testimony, you refer to venture capital firms having received $224 billion. is that within the chinese market or include understanding that there is the screening mechanism that is still in development but not yet fully applicable was that just domestic chinese or global? >> all encompassing. >> any percentage of what might be global, what percentage might be u.s.? >> i'll be happy to check back for you. i believe that is for the companies that are receiving money from venture capitalists. >> if you could that would be

helpful? any other questions from my colleagues. if not, in closing, thank you to all of our witnesses throughout the day for your excellent testimonies. the public can find those testimonies as well as a recording of the hearing on our website. the commission's next hearing will take place on friday march 1, titled chinese consumer products, safety, regulations and supply chains. and with that. we are adjourned. [captions copyright national cable satellite corp. 2024],. captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org rule that donap

has been disqualified. in session this weekend,