Fair Trade with China Enforcement Act

II 116TH CONGRESS 1ST SESSION S. 2 To safeguard certain technology and intellectual property in the United States from export to or influence by the People’s Republic of China and to protect United States industry from unfair competition by the People’s Republic of China, and for other purposes. IN THE SENATE OF THE UNITED STATES JANUARY 3, 2019 Mr. RUBIO (for himself and Ms. BALDWIN) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To safeguard certain technology and intellectual property in the United States from export to or influence by the People’s Republic of China and to protect United States industry from unfair competition by the People’s Republic of China, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Fair Trade with China Enforcement Act’’. 5 (b) TABLE OF CONTENTS.—The table of contents for 6 this Act is as follows: 7 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 2 •S 2 IS Sec. 1. Short title; table of contents. Sec. 2. Sense of Congress. Sec. 3. Statement of policy. TITLE I—SAFEGUARDS AGAINST FOREIGN INFLUENCE IN UNITED STATES NATIONAL AND ECONOMIC SECURITY BY THE PEOPLE’S REPUBLIC OF CHINA Sec. 101. Establishment of list of certain products receiving support from Gov- ernment of People’s Republic of China pursuant to Made in China 2025 policy. Sec. 102. Prohibition on export to People’s Republic of China of national secu- rity sensitive technology and intellectual property. Sec. 103. Imposition of shareholder cap on Chinese investors in United States corporations. Sec. 104. Prohibition on use of certain telecommunications services or equip- ment. TITLE II—FAIR TRADE ENFORCEMENT ACTIONS WITH RESPECT TO THE PEOPLE’S REPUBLIC OF CHINA Sec. 201. Countervailing duties with respect to certain industries in the Peo- ple’s Republic of China. Sec. 202. Repeal of reduced withholding rates for residents of China. Sec. 203. Taxation of obligations of the United States held by the Government of the People’s Republic of China. SEC. 2. SENSE OF CONGRESS. 1 It is the Sense of Congress that— 2 (1) since joining the World Trade Organization 3 in 2001, the People’s Republic of China has offered 4 the United States a contradictory bargain, which 5 promised openness in the global trade order, but 6 through state mercantilism delivered a severely im- 7 balanced trading relationship; 8 (2) it was erroneous for the United States Gov- 9 ernment to have ignored the contradictions and risks 10 of free trade with the People’s Republic of China on 11 the assumption that the People’s Republic of China 12 would liberalize economically and politically; 13 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 3 •S 2 IS (3) benefiting enormously from a more open 1 global economy to drive its own industries, the Gov- 2 ernment of the People’s Republic of China and the 3 Communist Party of the People’s Republic of China 4 have only tightened their grip on power, brutally 5 suppressing dissent at home and pursuing policies 6 abroad that are a far cry from being a responsible 7 global stakeholder; 8 (4) malevolent economic behavior by persons in 9 the People’s Republic of China is made clear by the 10 theft of intellectual property from the United States, 11 as Chinese theft of United States intellectual prop- 12 erty alone costs the United States nearly 13 $600,000,000,000 annually, according to the United 14 States Trade Representative; 15 (5) stealing United States intellectual property 16 advances the Made in China 2025 initiative of the 17 Government of the People’s Republic of China to 18 eventually dominate global exports in 10 critical sec- 19 tors, namely artificial intelligence and next-genera- 20 tion information technology, robotics, new-energy ve- 21 hicles, biotechnology, energy and power generation, 22 aerospace, high-tech shipping, advanced railway, new 23 materials, and agricultural machinery, among oth- 24 ers; 25 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 4 •S 2 IS (6) the targets of the Made in China 2025 ini- 1 tiative reveal the goal of the People’s Republic of 2 China for the near-total displacement of advanced 3 manufacturing in the United States; and 4 (7) the United States Government should act to 5 strengthen the position of the United States in its 6 policy toward the People’s Republic of China in 7 order to create a more balanced economic relation- 8 ship by safeguarding strategic assets from Chinese 9 influence, reducing Chinese involvement in the 10 United States economy, and encouraging United 11 States companies to produce domestically, instead of 12 in the People’s Republic of China. 13 SEC. 3. STATEMENT OF POLICY. 14 It is the policy of the United States— 15 (1) to impose restrictions on Chinese invest- 16 ment in the United States in strategic industries 17 targeted by the Made in China 2025 initiative set 18 forth by the Government of the People’s Republic of 19 China; 20 (2) to tax Chinese investment in the United 21 States due to its negative effect on the United 22 States trade deficit and wages of workers in the 23 United States; 24 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 5 •S 2 IS (3) to increase the cost of transnational produc- 1 tion operations in the People’s Republic of China in 2 a manner consistent with the economic cost of the 3 risk of loss of unique access by the United States to 4 intellectual property, technology, and industrial base; 5 and 6 (4) to support democratization in and the 7 human rights of the people of Hong Kong, including 8 the findings and declarations set forth under section 9 2 of the United States-Hong Kong Policy Act of 10 1992 (22 U.S.C. 5701). 11 TITLE I—SAFEGUARDS AGAINST 12 FOREIGN INFLUENCE IN 13 UNITED STATES NATIONAL 14 AND ECONOMIC SECURITY BY 15 THE PEOPLE’S REPUBLIC OF 16 CHINA 17 SEC. 101. ESTABLISHMENT OF LIST OF CERTAIN PRODUCTS 18 RECEIVING SUPPORT FROM GOVERNMENT 19 OF PEOPLE’S REPUBLIC OF CHINA PURSU- 20 ANT TO MADE IN CHINA 2025 POLICY. 21 (a) IN GENERAL.—Chapter 8 of title I of the Trade 22 Act of 1974 (19 U.S.C. 2241 et seq.) is amended by add- 23 ing at the end the following: 24 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 6 •S 2 IS ‘‘SEC. 183. LIST OF CERTAIN PRODUCTS RECEIVING SUP- 1 PORT FROM GOVERNMENT OF PEOPLE’S RE- 2 PUBLIC OF CHINA. 3 ‘‘(a) IN GENERAL.—Not later than 120 days after 4 the date of the enactment of the Fair Trade with China 5 Enforcement Act, and every year thereafter, the United 6 States Trade Representative shall set forth a list of prod- 7 ucts manufactured or produced in, or exported from, the 8 People’s Republic of China that are determined by the 9 Trade Representative to receive support from the Govern- 10 ment of the People’s Republic of China pursuant to the 11 Made in China 2025 industrial policy of that Government. 12 ‘‘(b) CRITERIA FOR LIST.— 13 ‘‘(1) IN GENERAL.—The Trade Representative 14 shall include in the list required by subsection (a) 15 the following products: 16 ‘‘(A) Any product specified in the following 17 documents set forth by the Government of the 18 People’s Republic of China: 19 ‘‘(i) Notice on Issuing Made in China 20 2025. 21 ‘‘(ii) China Manufacturing 2025. 22 ‘‘(iii) Notice on Issuing the 13th Five- 23 year National Strategic Emerging Indus- 24 tries Development Plan. 25 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 7 •S 2 IS ‘‘(iv) Guiding Opinion on Promoting 1 International Industrial Capacity and 2 Equipment Manufacturing Cooperation. 3 ‘‘(v) Any other document that ex- 4 presses a national strategy or stated goal 5 in connection with the Made in China 2025 6 industrial policy set forth by the Govern- 7 ment of the People’s Republic of China, 8 the Communist Party of China, or another 9 entity or individual capable of impacting 10 the national strategy of the People’s Re- 11 public of China. 12 ‘‘(B) Any product receiving support from 13 the Government of the People’s Republic of 14 China that has or will in the future displace net 15 exports of like products by the United States, 16 as determined by the Trade Representative. 17 ‘‘(2) INCLUDED PRODUCTS.—In addition to 18 such products as the Trade Representative shall in- 19 clude pursuant to paragraph (1) in the list required 20 by subsection (a), the Trade Representative shall in- 21 clude products in the following industries: 22 ‘‘(A) Civil aircraft. 23 ‘‘(B) Motor car and vehicle. 24 ‘‘(C) Advanced medical equipment. 25 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 8 •S 2 IS ‘‘(D) Advanced construction equipment. 1 ‘‘(E) Agricultural machinery. 2 ‘‘(F) Railway equipment. 3 ‘‘(G) Diesel locomotive. 4 ‘‘(H) Moving freight. 5 ‘‘(I) Semiconductor. 6 ‘‘(J) Lithium battery manufacturing. 7 ‘‘(K) Artificial intelligence. 8 ‘‘(L) High-capacity computing. 9 ‘‘(M) Quantum computing. 10 ‘‘(N) Robotics. 11 ‘‘(O) Biotechnology.’’. 12 (b) CLERICAL AMENDMENT.—The table of contents 13 for the Trade Act of 1974 is amended by inserting after 14 the item relating to section 182 the following: 15 ‘‘Sec. 183. List of certain products receiving support from Government of Peo- ple’s Republic of China.’’. SEC. 102. PROHIBITION ON EXPORT TO PEOPLE’S REPUB- 16 LIC OF CHINA OF NATIONAL SECURITY SEN- 17 SITIVE TECHNOLOGY AND INTELLECTUAL 18 PROPERTY. 19 (a) IN GENERAL.—The Secretary of Commerce shall 20 prohibit the export to the People’s Republic of China of 21 any national security sensitive technology or intellectual 22 property subject to the jurisdiction of the United States 23 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 9 •S 2 IS or exported by any person subject to the jurisdiction of 1 the United States. 2 (b) DEFINITIONS.—In this section: 3 (1) INTELLECTUAL PROPERTY.—The term ‘‘in- 4 tellectual property’’ includes patents, copyrights, 5 trademarks, or trade secrets. 6 (2) NATIONAL SECURITY SENSITIVE TECH- 7 NOLOGY OR INTELLECTUAL PROPERTY.—The term 8 ‘‘national security sensitive technology or intellectual 9 property’’ includes the following: 10 (A) Technology or intellectual property 11 that would make a significant contribution to 12 the military potential of the People’s Republic 13 of China that would prove detrimental to the 14 national security of the United States. 15 (B) Technology or intellectual property 16 necessary to protect the economy of the United 17 States from the excessive drain of scarce mate- 18 rials and to reduce the serious inflationary im- 19 pact of demand from the People’s Republic of 20 China. 21 (C) Technology or intellectual property 22 that is a component of the production of prod- 23 ucts included in the most recent list required 24 under section 183 of the Trade Act of 1974, as 25 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 10 •S 2 IS added by section 101(a), determined in con- 1 sultation with the United States Trade Rep- 2 resentative. 3 (3) TECHNOLOGY.—The term ‘‘technology’’ in- 4 cludes goods or services relating to information sys- 5 tems, Internet-based services, production-enhancing 6 logistics, robotics, artificial intelligence, biotechnolo- 7 gy, or computing. 8 SEC. 103. IMPOSITION OF SHAREHOLDER CAP ON CHINESE 9 INVESTORS IN UNITED STATES CORPORA- 10 TIONS. 11 Section 13(d) of the Securities Exchange Act of 1934 12 (15 U.S.C. 78m(d)) is amended by adding at the end the 13 following: 14 ‘‘(7)(A) In this paragraph, the term ‘covered issuer’ 15 means any issuer that produces components that may be 16 used in the production of goods manufactured or produced 17 in, or exported from, the People’s Republic of China and 18 included in the most recent list required under section 183 19 of the Trade Act of 1974, determined in consultation with 20 the United States Trade Representative. 21 ‘‘(B) No covered issuer that is incorporated under the 22 laws of a State, or whose principal place of business is 23 within a State, may be majority-owned by a person whose 24 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 11 •S 2 IS principal place of business is in the People’s Republic of 1 China. 2 ‘‘(C) The prohibition in subparagraph (B) shall apply 3 to any acquisition on or after the date of enactment of 4 this paragraph.’’. 5 SEC. 104. PROHIBITION ON USE OF CERTAIN TELE- 6 COMMUNICATIONS SERVICES OR EQUIP- 7 MENT. 8 (a) FINDINGS.—Congress makes the following find- 9 ings: 10 (1) In its 2011 ‘‘Annual Report to Congress on 11 Military and Security Developments Involving the 12 People’s Republic of China’’, the Department of De- 13 fense stated, ‘‘China’s defense industry has benefited 14 from integration with a rapidly expanding civilian 15 economy and science and technology sector, particu- 16 larly elements that have access to foreign technology. 17 Progress within individual defense sectors appears 18 linked to the relative integration of each, through 19 China’s civilian economy, into the global production 20 and R&D chain . . . Information technology compa- 21 nies in particular, including Huawei, Datang, and 22 Zhongxing, maintain close ties to the PLA.’’. 23 (2) In a 2011 report titled ‘‘The National Secu- 24 rity Implications of Investments and Products from 25 VerDate Sep 11 2014 22:47 Jan 03, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2.IS S2 kjohnson on DSK79L0C42 with BILLS 12 •S 2 IS the People’s Republic of China in the Telecommuni- 1 cations Sector’’, the United States China Economic 2 and Security Review Commission stated that 3 ‘‘[n]ational security concerns have accompanied the 4 dramatic growth of China’s telecom sector. . . . Ad- 5 ditionally, large Chinese companies—particularly 6 those ‘national champions’ prominent in China’s 7 ‘going out’ st [Text truncated for display. Full text available on Congress.gov.]