Congress gets tough on China over trade secrets

Washington is ratcheting up pressure on China over the country’s alleged theft of trade secrets, even as the dispute quickly escalates.

Lawmakers in recent weeks have introduced several bipartisan bills aimed at Chinese telecom firms believed to have government ties, and federal prosecutors are reportedly preparing an indictment against one Chinese company over stealing trade secrets from American businesses.

{mosads}The stakes for both countries and for U.S. allies are growing. After Canadian officials arrested a Chinese executive last year at the request of American authorities, China retaliated by detaining several Canadian citizens and sentencing one to the death penalty.

But lawmakers insist the U.S. needs to follow through and hold China accountable for alleged intellectual property theft. And they want the administration to do more to address the national security threat from Chinese companies.

“[Chinese President] Xi Jinping’s a bully, and you have to stand up to bullies,” Rep. Mike Conaway (R-Texas) told The Hill. “And there may at times be pushback but that doesn’t mean you don’t stand up to it, because if you don’t stand up to it they just continue to be a bully, even worse.”

“As China gets stronger, as their economy gets bigger, as the military forces get more advanced and stronger, that bully’s getting bigger,” Conaway added. “And now’s the time to stand up to them.”

Conaway is among the lawmakers who recently offered legislation targeting Chinese intellectual property theft and the nation’s telecommunications firms, including Huawei and ZTE. Lawmakers and U.S. intelligence agencies warn that China may use those companies’ products to spy on Americans.

One of the bipartisan bills would create a White House office to combat Chinese digital threats like those posed by the companies. Conaway also unveiled a bill this month that would ban the U.S. government from using products from Huawei and ZTE. And on Tuesday, Conaway reintroduced legislation that would block the U.S. from selling any technology or intellectual property with national security implications to China.

Those efforts are being matched in the upper chamber, where Sens. Marco Rubio (R-Fla.) and Mark Warner (D-Va.) have introduced a Senate version of the bill to create a White House office to counter Chinese tech threats.

{mosads}Rubio, a vocal critic of Huawei and other Chinese firms, said in a statement to The Hill that “there is a growing, bipartisan recognition that China’s industrial espionage and coercion threatens America’s economic framework and national prosperity.” 

“I will continue to use every leverage point in my fight against China’s blatant efforts to undermine America’s economy and national security,” he said.

Another bill, from a bipartisan House and Senate group last week, would require Trump to block the exportation of American products to Chinese firms that have violated U.S. sanctions, like Huawei.

Sen. Tom Cotton (R-Ark.), one of the harshest critics of Huawei, said in a statement that the firm “is effectively an intelligence-gathering arm of the Chinese Communist Party.”

“It’s imperative we take decisive action to protect U.S. interests and enforce our laws. If Chinese telecom firms like Huawei violate our sanctions or export control laws, they should receive nothing less than the death penalty — which this denial order would provide,” he said.

But even with the pressure from Congress mounting, China has stood its ground.

Canada arrested a Huawei executive, Meng Wanzhou, in December and is moving to extradite her to the U.S. over alleged sanctions violations. Beijing has called the arrest unwarranted.

A Chinese Foreign Ministry spokeswoman last week called for an end to “groundless fabrications and unreasonable restrictions toward Huawei and other Chinese companies.”

China has also retaliated by detaining Canadian citizens. A Chinese court also sentenced a Canadian man to death over a drug smuggling conviction, a move both the U.S. and Canada called politically motivated.

A group of academics and former diplomats issued an open letter to China over the weekend, requesting that the Canadian men who were detained — ex-diplomat Michael Kovrig and entrepreneur Michael Spavor — be released.

“Both China and the rest of the world will be worse off as a result,” the letter says of the arrests.

Scott Kennedy, the Freeman Chair in China Studies at the Center for Strategic and International Studies and a signatory of the letter, said China saw a real threat from congressional legislation.

He said some of the bills could effectively cripple companies like Huawei from operating.

“If someone tried to put Microsoft out of business, the U.S. would probably have a viscerally negative reaction,” he said, but acknowledged the U.S. likely wouldn’t illegally detain foreign citizens.

Kennedy also noted that there were questions about the extent of the threat from Chinese telecom firms. He noted that U.S. intelligence agencies still haven’t disclosed many details.

“The U.S. government has never articulated what that danger is,” Kennedy said. “They wink and nod and one should assume that their analysis is genuine and not simply a way to benefit born out of a desire to help American companies or a dislike of China.”

“But without a public discussion about the genuine risks, then we run the risk of overreacting or underreacting,” he added.

The alleged intellectual property theft has also been at the heart of the months-long trade battle between the U.S. and China. The two countries face tough trade talks over intellectual property rules and other issues.

U.S. trade officials have accused China of violating a 2015 agreement to end the practice of stealing trade secrets.

The Wall Street Journal also reported this month that federal prosecutors have opened a criminal investigation into Huawei for allegedly stealing intellectual property from U.S. businesses, including T-Mobile. 

That move is only likely to ratchet up tensions but is also being welcomed by lawmakers.

Conaway said it was “fantastic” if federal prosecutors are in fact eyeing Huawei for a potential criminal indictment.

“This will help highlight what many of us have seen from Huawei and ZTE and whatever new name they put on their subsidiaries to continue to unfairly compete in the market,” Conaway said.