November 30, 2022
(As prepared for delivery)
This year marks the 50th anniversary of the opening of relations between China and the United States. For most of this period, the United States was committed to the idea that economic engagement with China would serve our mutual interests: first, as a counterweight to the Soviet Union, and later as a gateway to a deeper political and economic partnership. Engagement also provided U.S. companies with greater access to China’s market and helped open China’s economic system. And some even thought that over time China would take its place alongside the U.S. and other advanced economies to become a pillar of the post-war liberal international order.
But now it is clear that China took a different path—and with that has come profound impacts on our bilateral relationship and on China’s behavior on the global stage.
Over the past decade, China’s leaders have made clear that they do not plan to pursue political and economic reform and are instead pursuing an alternative vision of their country’s future. They are committed to increasing the role of the state in society and the economy, constraining the free flow of capital and information, and decoupling economically in a number of areas, including many technology sectors of the future. They have firewalled their data economy from the rest of the world. And they are accelerating their efforts to fuse their economic and technology policies with their military ambitions.
As China’s economy has grown in size and influence, so too has its commitment to using non-market trade and investment practices in ways that are forcing us to defend our businesses and workers – and those of our allies and partners. China’s reprioritization away from economic growth toward national security and its assertive military behavior means that we have to rethink how we protect our national security interests while also promoting our interests in trade and investment.
In the face of this dramatically transformed strategic environment, our economic priorities are clear: ensuring that the U.S. builds the talent, technologies, and manufacturing capabilities necessary to lead the global economy in the 21st century—to be at the forefront of global innovation in an era of unprecedented technological change and competition; to provide our workforce with the education and training necessary to compete for the jobs of the future; to safeguard our national security and democratic values; and grow in ways that reflect our values of sustainable and inclusive growth, as well as openness, transparency, and the rule of law.
Our strategy to realize these priorities has four components—
- First, we are making transformational investments in American innovation.
- Second, we are bolstering our domestic capabilities and creating new ones to prevent China from undermining our national security and democratic values.
- Third, we are partnering with our allies in new ways to advance our shared values and shape the strategic environment in which China operates.
- And fourth, we are advocating for U.S. trade and investment and the benefits that come with it, as well as working together with China to address transnational issues, such as climate change and global macroeconomic stability.
But U.S. government policies are only part of the answer. We need the private sector, including business, labor, and universities, to work with us to ensure America’s long-term prosperity and security. We are pushing on all fronts, all at once. And we need to do it all together.
Our competition with China is global, but our economic strategy begins at home. Our economic competitiveness and national security depend on a bold domestic investment agenda in strategic and critical sectors.
In just the first twenty months of the administration, we worked with Congress to enact the Bipartisan Infrastructure Act, the CHIPS and Science Act, and the Inflation Reduction Act. Taken together, it represents over $1 trillion of investment in America. A once-in-a-generation commitment to innovation, technology, manufacturing, workforce training, and the infrastructure, including broadband, we need to ensure our future competitiveness and national security. It is what President Biden has termed a “modern industrial strategy” – an approach rooted deeply in America’s history—from Alexander Hamilton’s Report on Manufacturers to President Lincoln’s intercontinental railroad—but calibrated to the new, forward-looking challenges and opportunities of the 21st century.
With these transformational investments, we are also reimagining our national innovation ecosystem well beyond Silicon Valley and Silicon Alley to create new technology innovation and manufacturing hubs throughout the country. These hubs will take advantage of our nation’s diversity, foster new collaborations among businesses, universities, labor, and local communities, and position the United States to lead in the 21st-century global economy.
In R&D, we are working across the government and with leading university and industry experts to identify and invest in core critical and emerging fields of technology where we want to attain global leadership, such as advanced computing, biotechnologies and biomanufacturing, and clean energy technologies.
We are also revitalizing U.S. domestic manufacturing, particularly advanced manufacturing. Over the past decades, communities across the country have seen manufacturing shut down, businesses shutter, and the local engines of innovation grind to a halt, as we exported jobs and manufacturing capacity to China and the rest of Asia and reduced investment in the workforce development and infrastructure necessary to maintain our long-term competitiveness.
I felt the effects of this shift firsthand. My father worked his whole career in the Bulova Watch Factory in Providence. But after 28 years, his job moved to China as the company chased cheap labor. And just like all his friends, my father was forced into early retirement. What happened to my father is hardly unique. It happened to millions of Americans over the last 40 years.
While we watched China become a world leader in manufacturing and reap the massive benefits of manufacturing-driven innovation, the U.S. economy became LESS competitive and overly dependent on China for an increasing number of critical technologies and goods. It is worth noting, by the way, that China achieved its success through massive state support of its industries. COVID opened our eyes to the long-term risk for both the private sector and the American people of this over-dependence on China and the need to rebuild domestic manufacturing and innovation.
Semiconductors are ground-zero in this technological competition and central to our new investment strategy. They drive innovation in nearly every emerging technology and support critical national security applications. The U.S. invented the semiconductor industry and once led the world in producing the most advanced chips. Today, we no longer manufacture the world’s most advanced semiconductors and produce only 10 percent of global chip capacity. Meanwhile, since 2020, nearly 75 percent of the new global capacity for certain mature chips has been added in China.
The CHIPS and Science Act marks the beginning of a new chapter in U.S. innovation where we reverse that decline and ensure that the United States retains its leadership in the technologies and industries of the 21st century. In the coming years, the Commerce Department will invest $52 billion in domestic semiconductor manufacturing, including workforce training and R&D, to create a vibrant domestic industry.
But this public investment is only a starting point. It is designed to spur the business community to crowd in private capital and be our partner in making the kinds of investments that generate long-term returns for business and advance American competitiveness. Our goal is to lay a foundation for American business to do what American business does best – innovate, scale, and compete.
Through R&D and manufacturing incentives, we are facilitating new public-private partnerships to enable domestic production of the most advanced chips and expand the production of mature chips essential to national and economic security. And we are looking to labor and educational institutions to provide the workforce training and apprenticeship programs necessary to build and operate new manufacturing facilities.
We have adopted a similar approach to public investment in the Inflation Reduction Act—the IRA. We are investing $369 billion, which is the largest federal investment ever made to transition the United States to a clean energy future and combat the climate crisis. By one estimate, that $369 billion will catalyze another $1.7 trillion in public and private investment over the next ten years.
The administration also recently launched a National Biotechnology and Biomanufacturing Initiative to ensure that what happened to the United States in semiconductors and telecommunications does not happen in biotech—ensuring we translate our leadership in biotech R&D into leadership in biotech manufacturing and jobs.
I am proud to say that we are already seeing our strategy pay off. Companies such as Micron Technology and Intel have announced significant new investments in semiconductor manufacturing in Syracuse and Columbus. And they are partnering with local universities and community colleges to develop the courses and training programs necessary to support tens of thousands of new, well-paying manufacturing jobs. Already we have added more than 700,000 manufacturing jobs to the U.S. economy—the most in almost three decades.
Going forward, we are not only going to invent the technologies of the future in America but we are going to manufacture them here too.
We are also investing in America’s massive talent pipeline. The United States is blessed with universities that consistently produce world-class scientists, innovators, and entrepreneurs. Here at MIT, your graduates and professors have contributed to pathbreaking scientific and technological advancements for more than 150 years.
But we want—and need—more Americans to be part of this exciting innovation ecosystem. We are increasing the amount of R&D funding we make available to universities OUTSIDE our major research centers to ensure that we access the broadest possible range of talent. We are also making significant investments in STEM education for underrepresented students, such as people of color, girls, and low-income youth. And we are building new onramps to high-skilled, well-paying manufacturing jobs – many of which don’t require a college degree.
We must also continue to attract the most talented people from around the world. Our history of renewal and reinvention has been powered by immigrants. And let me be clear: there is no room in our path to competitiveness for racism or xenophobia. Chinese Americans have been – and will continue to be – an essential part of this American story of renewal. Right now, there are roughly 300, 000 students from China studying in the United States. We will continue to welcome Chinese students and immigrants, and we won’t hesitate to stand up to racism against people of Chinese heritage.
Attracting and retaining the world’s best STEM talent is an advantage that is America’s to lose. And we are not going to let that happen. Early this year, we announced a series of measures to streamline the immigration process and open new pathways for international STEM students and researchers. But there is so much more to do. We are ready to work with industry and Congress on a bipartisan basis to capitalize on what is truly America’s superpower.
Our other great competitive advantage is our diversity. Diversity fuels innovation. But to unleash all of our talents, we must give all Americans the opportunity to participate in the economy of the 21st century. With support from the Bipartisan Infrastructure Law, the Department of Commerce is connecting tens of millions of Americans to affordable, high-speed internet. We will have an economy where Americans can participate from anywhere and compete everywhere.
Our transformative domestic investment agenda is at the heart of our long-term economic competitiveness. But outcompeting China to shape and lead the global economy of the 21st century also demands that we move nimbly and quickly to harden our defenses against an array of emerging and ongoing practices that tilt the playing field against American workers and businesses and in some cases, threaten our national security.
China today poses a set of growing challenges to our national security. It is deploying its military in ways that undermine the security of our allies and partners and the free flow of global trade. It dominates the manufacturing of many critical materials and goods and has exploited other economies’ dependence on its market for political coercion. It also seeks to dominate certain advanced technology sectors, while using many of those technologies to advance its military modernization and undermine fundamental human rights at home and abroad.
We believe there are three families of technologies that will be of particular importance over the coming decade: first, computing-related technologies, including microelectronics, quantum information systems, and artificial intelligence; second, biotechnologies and biomanufacturing; and third, clean energy technologies. We will continue to take action to protect our advantage and maintain as large a lead as possible in these foundational technologies.
We are moving aggressively to reform our current capabilities and create new ones to accomplish this goal. Together with the private sector, we are going to bolster our system of export controls, enhance our investment screening regimes, strengthen our supply chain resiliency, and develop innovative solutions to counter China’s economic coercion and human rights abuses.
To begin with, we are redoubling our efforts to safeguard our core technologies by strategically and continuously updating our export control policies and investment screening frameworks.
In October, we released a set of rules that impose systematic and technology-specific export controls to limit China’s ability to purchase and manufacture certain very advanced computing chips that are used to train large-scale artificial intelligence models, and which power the country’s advanced military and surveillance systems, as well as the manufacturing equipment used to make these cutting-edge chips.
In addition, we restricted American citizens from supporting these advanced technology programs.
For too long, America’s export control strategy was reactive—focused on preventing China from expanding its technological capabilities after it accessed American intellectual property. But these new rules are strategic, targeted, and designed to protect our national security.
And as part of the CHIPS and Science Act, we worked in a bipartisan way with Senators Cornyn and Casey and Representatives McCaul, Lucas, and DeLauro to implement historically strict guardrails to ensure the investments we make in research and innovation are never used to benefit China’s military efforts.
We are also modernizing our review of inbound investment. A few months ago, we issued Presidential guidance—the first of its kind since the Committee on Foreign Investment in the United States was established decades ago—to direct a focus on certain critical new risk factors when evaluating potential inbound investment, such as technological leadership, supply chain dependency, and foreign company access to our personal data.
And together with Congress and the private sector, we are working to identify and mitigate the risks to our national security from outbound capital investments in critical technology sectors. As one example, we have prohibited companies receiving CHIPS funding from investing in leading-edge or advanced technology facilities in China for ten years.
Our strategy also includes the protection of our critical supply chains.
During the COVID pandemic, we witnessed how the concentration of personal protective equipment manufacturing in China put Americans at risk.
I remember this time vividly. I was Governor when the pandemic hit. Like so many other states, Rhode Island desperately needed ventilators and PPE. I spent night after night calling countries around the world, nearly always in Asia, asking them to help us get the supplies we needed.
Now, as Commerce Secretary, I am determined that we will never let ourselves become dependent on one country for the goods we need to keep our people safe.
We have mounted a whole-of-government effort to identify the commodities and technologies where our inability to source, process, or manufacture domestically could cause great damage to our security.
In these areas, we are working with the private sector to re-shore or friend-shore core parts of our supply chains. And we are developing a near real-time “common operating picture” of global supply chains for critical industries so that we can address vulnerabilities as quickly as possible.
Related to this, we are exploring new avenues to defend ourselves and others from China’s economic coercion. Reducing our companies’ dependence on China for core parts of our critical supply chains is one part of the answer, but not the entire answer.
For example, when China cut off trade with Lithuania, we opened our markets to Lithuanian agricultural products and provided a $600 million export credit agreement focused on manufacturing, business services, and renewable energy.
Developing an effective deterrent against this kind of economic coercion is a priority for the Biden Administration, as well as for our partners and allies.
I also want to underscore the priority that we are placing on ensuring that our companies are not complicit in China’s gross human rights abuses. Our trade and investment with China should reflect our core democratic values. That is why, President Biden signed the bipartisan Uyghur Forced Labor Prevention Act into law – requiring companies to certify that they are not sourcing goods that relied upon forced labor in their production.
Finally, I hear often from U.S. business leaders about the challenges this rapidly changing policy environment poses to their ability to make smart, long-term investment decisions. And while I certainly understand this challenge, our policies cannot be static. They need to adapt continuously to the dynamic interaction between technological change and national security. But in such a complex environment, it’s on us in the government to provide clear and consistent guidance that the business community needs to succeed; to be as consultative and transparent as possible, to minimize disruptive change, and to adopt measures multilaterally. We are committed to a strong and vibrant partnership with our private sector.
At the same time, it’s on the private sector to recognize that we’re operating in a fundamentally different strategic environment from a decade ago and to work with us to realize our economic and national security objectives. The decisions our universities and companies make today on where and how they undertake research, engage in trade, and make investment decisions will profoundly shape our economic and national security for decades to come. And I would note that MIT’s recently released China strategy report on research integrity and collaboration with PRC partners is an example of the type of initiative we need to help inform our policy and chart a sensible path forward.
Now, all of the measures I have outlined—from export controls to new investment parameters to supply chains—require not an only partnership between the U.S. government and private sector but also between the U.S. and our allies and partners.
In our competition with China to shape the 21st-century global economy, we cannot go at it alone. As Secretary Blinken articulated earlier this year, the Biden administration’s approach to China is centered not only on investment at home but also on alignment with our allies and partners abroad. When I meet with my counterparts from other countries, they voice similar concerns about China’s behavior and a shared desire to cooperate and coordinate our policies around the rules, standards, and values that advance our collective national security and economic well-being. They, too, see how China’s direction has changed and are adjusting their strategies accordingly.
For example, we have established the Quad Critical and Emerging Technologies working group with Japan, Australia, and India, as well as the U.S.-EU Trade and Technology Council, or TTC, which will be meeting next week in DC, to align our approaches secure supply chains, export controls, data governance, and investment screening.
We are witnessing the strength of this partnership right now in the extraordinary degree of coordination we have achieved around the implementation of sanctions against Russia in response to its invasion of Ukraine.
We are also reasserting U.S. economic leadership and partnership in the most economically dynamic region of the world. Last May, in Tokyo, President Biden launched the Indo-Pacific Economic Framework or IPEF, with thirteen partner countries that together with the U.S. represent over 40 percent of global GDP.
This innovative economic framework represents a proactive economic strategy, designed to support a regional economy that is connected, resilient, clean, and fair and will provide a competitive and attractive new market for U.S. exports and investment.
It will also be a kind-of-a “supply chain diversity accelerator” by facilitating U.S. companies with more competitive sources of production and suppliers.
And American workers will benefit too. For example, last summer we saw how COVID-related chip manufacturing slowdowns in Asia contributed to layoffs for auto workers in Detroit. IPEF’s supply chain crisis response mechanism will help us avoid a similar situation in the future.
Long-term U.S. competitiveness also depends on our continued and active participation in international institutions that set data and technology standards.
In recent years, China has assumed leadership positions in several important international standard setting bodies. We have heard from our companies, as well as those from other countries, that China often packs these organizations with government and business representatives who work together to push the country’s authoritarian standards and values.
These efforts “to game the system” undermine good governance, place our companies at a disadvantage in the global technology competition, and put at risk many of our fundamental values, such as the free flow of information and data privacy. We are taking steps to elevate U.S. leadership and presence in these bodies and to coordinate our efforts with our partners.
It is not enough, however, to work with our traditional allies and partners to set the standards for the global economy of the 21st century. We are also engaging more deeply with the vibrant emerging economies of the global south to meet their desire for growth that is sustainable, broad-based, inclusive, and transparent.
As an important first step, President Biden, together with our G7 partners, launched the $600 billion Partnership for Global Infrastructure and Investment, or PGII, to support climate-resilient infrastructure, better healthcare, and sustainable energy. At the Department of Commerce, for example, we are partnering with U.S. Exim-Bank, U.S. businesses, and the government of Angola to develop a $2 billion solar project. This investment will not only help Angola power its economy with clean energy but also support up to $1.3 billion in U.S. exports.
Taken together, these new multilateral arrangements reflect the shared values of the U.S. and its partners and allies. They amplify the power of U.S. and they provide the basis for future global growth that is sustainable and inclusive.
Now, while much of our China economic strategy is necessarily focused on what we can do at home and with our allies to ensure our own competitiveness, we also need to get the bilateral economic relationship with China right by protecting and also actively promoting our economic interests.
China’s government employs a range of economic practices that disadvantage foreign companies trying to compete in the PRC market. China’s government also gives unfair advantages to its own industries in ways that displace American workers and businesses – and those of our allies and partners – from the global market. We will continue to press China to address its non-market economic practices that result in an uneven playing field, such as such as its massive support – financial, regulatory, or otherwise – to its state-owned and private firms, forced technology transfer, and egregious intellectual property theft. And we are working with our G7 allies on a shared approach to these issues.
At the same time, we are not seeking the decoupling of our economy from that of China’s. We want to promote trade and investment in areas that do not threaten our core economic and national security interests or human rights values. Annual trade between our two countries has grown exponentially from $4.7 million in 1972 to more than $750 billion today. This trade provides revenues for American companies, jobs for American workers, and connectivity with the Chinese people.
China is now our third largest export market, and those exports directly support 750,000 American jobs. The benefits from these exports go not only to our large multinationals but also to more than 25,000 small and medium-sized enterprises that exported $33 billion to China in 2020. To support these smaller businesses, the Commerce Department recently launched an export promotion initiative around personal care products. We aim to boost exports by helping SMEs navigate the market, while ensuring that their IP is protected. China is also the U.S.’s largest agricultural market, and our farmers are on track to export $36 billion in agricultural goods this year to China.
U.S. soft power also benefits from the popularity of our companies and brands in China’s consumer culture. Starbucks has built more than 5,000 stores in China. When Apple launched its iPhone 13, shoppers in China stampeded through a mall to be first in line. Our products signify not only high-quality but also our values of openness, innovation, and creativity.
We want to continue to promote trade and investment in those areas that do not undermine our interests or values, while using all the tools at our disposal to protect our companies and counter unfair economic practices. For example, we maintain a team of intellectual property experts in China that helps address our companies’ needs while seeking to drive important changes to China’s IP laws over the longer term.
No-one can outcompete the U.S. if we are playing by the same rules.
And as President Biden made clear during his recent meeting with China’s President Xi Jinping earlier this month, we want to work with China on issues of global economic importance, such as climate change, food security, health security, and debt relief. For that reason, I met with China’s Minister of Ecology and Environment to advocate for our companies and to propose that we work together to reduce ocean pollution and marine plastic debris.
Of course, we want American workers to benefit from exporting and American companies to thrive in global markets, including China. But we also have to be sober about China’s current direction of travel.
For almost forty years, we championed the benefits of a robust trade and investment relationship with China, often overlooking the long-term costs for the near-term benefits. And above all, we must remember that sustaining these benefits over the long term requires that we defend our security and values in the near term.
In recent years, China’s leaders have promoted a narrative that the East is rising, and the West is declining.
I hope you see something different. I see something different.
I see that the U.S. is the world’s largest economy, that it is blessed with one of the most diverse populations in the world—and that this diversity is a source of unparalleled creativity and strength—that our companies are among the world’s most innovative and profitable, that our universities are the envy of all countries, and that we have a strong and growing network of powerful allies and partners.
Yet, despite all of our strengths, competing effectively with China will take hard work.
We are taking the steps necessary to address the full range of challenges that China now presents. We are redoubling our commitment to invest at home. We are aligning our policies with our allies around our values of freedom, privacy, the rule of law, and fair competition. And we are competing by investing in robust public-private partnership and rethinking our tools of economic statecraft.
All of this leaves me confident that we can deliver on the clarity of purpose, consistency in execution, and long-term commitment that will be necessary to ensure our continued leadership in global innovation and protect our economic and national security.