WEBVTT 00:02.680 --> 00:04.230 - Committee will come to order. 00:08.220 --> 00:12.330 In his January 19, 2018, remarks 00:12.330 --> 00:13.800 on the national defense strategy, 00:13.800 --> 00:16.010 Secretary Mattis warned that, quote: 00:16.010 --> 00:20.470 "Our competitive edge has eroded in every domain of warfare: 00:20.470 --> 00:24.180 "air, land, sea, space, and cyberspace, 00:24.180 --> 00:27.660 "and it is continuing to erode," end quote. 00:28.710 --> 00:30.650 Now much of that erosion has been caused 00:30.650 --> 00:33.060 by things we've done to ourselves, 00:33.060 --> 00:36.450 sequestration and continuing resolutions come to mind, 00:37.710 --> 00:40.030 but part of the erosion in our competitive edge 00:40.030 --> 00:42.460 is the result of adversaries and competitors 00:42.460 --> 00:45.470 obtaining American technology and intellectual property 00:45.470 --> 00:49.220 by legal and often illegal means. 00:50.590 --> 00:53.330 In its January 2018 report, 00:53.330 --> 00:57.620 China's technology transfer strategy DIUx found that 00:57.620 --> 01:00.740 the People's Republic of China, for example, 01:00.740 --> 01:04.390 uses a variety of methods to obtain US technology 01:04.390 --> 01:09.130 including industrial espionage where China is by far 01:09.130 --> 01:12.910 the most aggressive country operating in the US. 01:12.910 --> 01:15.340 Cyber theft on a massive scale 01:15.340 --> 01:17.990 deploying hundreds of thousands 01:17.990 --> 01:20.650 of Chinese army professionals. 01:20.650 --> 01:25.500 Academia since 25% of US STEM graduate students 01:25.500 --> 01:28.290 are Chinese foreign nationals. 01:28.290 --> 01:30.880 China's use of open-source information 01:30.880 --> 01:34.670 cataloging foreign innovation on a large scale. 01:34.670 --> 01:38.200 Chinese-based technology transfer organizations. 01:38.200 --> 01:40.600 US-based association sponsored by 01:40.600 --> 01:43.300 the Chinese government to recruit talent, 01:43.300 --> 01:47.020 and technical expertise on how to do deals, 01:47.020 --> 01:49.120 learn from US firms. 01:49.970 --> 01:51.550 That report noted that the cost 01:51.550 --> 01:54.750 of stolen intellectual property has been estimated 01:54.750 --> 01:56.930 at $300 billion a year. 01:58.040 --> 02:01.420 Most alarming, DIUx found that, again I'll quote, 02:01.420 --> 02:05.700 "The US does not have a comprehensive policy or the tools 02:05.700 --> 02:09.980 "to address this massive technology transfer to China, 02:09.980 --> 02:12.990 "and the US government does not have a holistic view 02:12.990 --> 02:16.560 "of how fast this technology transfer is occurring. 02:16.560 --> 02:19.570 "The level of Chinese investment in US technology 02:19.570 --> 02:22.200 "or what technologies we should be protecting," 02:23.870 --> 02:25.270 that's the end of the quote. 02:26.430 --> 02:29.560 Now I understand that the DIUx report is just one report 02:29.560 --> 02:32.960 but based on everything this committee has learned and heard 02:32.960 --> 02:35.180 about over the course of this year, 02:35.180 --> 02:37.440 those conclusions sound right to me, 02:37.440 --> 02:39.530 and it should be alarming. 02:39.530 --> 02:42.600 There are several provisions in the upcoming NDAA conference 02:42.600 --> 02:44.410 which relate to this issue 02:44.410 --> 02:46.480 including the modernization of CFIUS, 02:46.480 --> 02:48.650 an export control regime. 02:48.650 --> 02:51.020 This hearing will better equip us 02:51.020 --> 02:55.000 to make important decisions in the days ahead. 02:55.000 --> 02:56.370 Let me yield to the ranking member 02:56.370 --> 02:58.290 for any comments he'd like to make. 02:59.220 --> 03:00.130 - Thank you, Mr. Chairman. 03:00.130 --> 03:01.540 I think the most important part 03:01.540 --> 03:03.010 of your statement was at the end there 03:03.010 --> 03:04.760 is that we don't have a strategy 03:04.760 --> 03:06.900 to counter what is happening. 03:06.900 --> 03:10.700 I think the chairman is right and the Secretary of Defense 03:10.700 --> 03:12.810 is correct, our advantage in a number 03:12.810 --> 03:14.630 of different areas has been eroding. 03:14.630 --> 03:16.980 Now the biggest reason for that I believe 03:16.980 --> 03:19.830 is that the rest of the world is catching up. 03:19.830 --> 03:22.170 I mean there was a substantial period of time there 03:22.170 --> 03:25.880 when it was really just the Soviet Union and us 03:25.880 --> 03:28.220 who were building on a significant level 03:28.220 --> 03:29.690 our military capacity, 03:30.760 --> 03:34.100 and we dominated the world economically and militarily 03:34.100 --> 03:37.280 post World War II for a long period of time. 03:37.280 --> 03:40.510 That was never going to last forever. 03:40.510 --> 03:42.670 The rest of the world was going to develop ways 03:42.670 --> 03:44.910 to grow their economies, grow their technology, 03:44.910 --> 03:47.590 and eventually turn towards growing their defense, 03:47.590 --> 03:49.350 and that's what's happened, 03:49.350 --> 03:50.920 but what hasn't happened on our end 03:50.920 --> 03:52.830 is we haven't responded to that. 03:52.830 --> 03:54.890 Our strategy still seems to be based 03:54.890 --> 03:57.240 on the notion that we're still dominant, 03:57.240 --> 03:59.270 so we don't have to worry about these details, 03:59.270 --> 04:02.290 and I think that is dangerous and that we need to develop. 04:02.290 --> 04:04.720 But I'll just mention a couple of key areas, 04:04.720 --> 04:07.670 most of which the chairman mentioned, 04:07.670 --> 04:10.780 but to begin with the CFIUS Process 04:10.780 --> 04:15.460 of protecting our technology has long needed reform. 04:15.460 --> 04:16.960 Items that were not thought of 04:16.960 --> 04:19.580 as being national security, are. 04:20.440 --> 04:22.110 Technology, how do we protect that? 04:22.110 --> 04:24.410 How do we make sure that adversaries 04:24.410 --> 04:25.900 aren't purchasing those companies 04:25.900 --> 04:27.670 and taking away our technology? 04:27.670 --> 04:30.270 I think what the senate added to the Defense Bill 04:30.270 --> 04:33.680 is a great opportunity for us to update that process 04:33.680 --> 04:35.550 to help protect our technologies 04:35.550 --> 04:37.360 through the CFIUS// process, 04:37.360 --> 04:39.250 and we have to get that right. 04:40.280 --> 04:43.370 And we're gonna try to do that in the next five/six weeks, 04:43.370 --> 04:44.830 so we definitely wanna be in touch, 04:44.830 --> 04:45.970 make sure the language is right, 04:45.970 --> 04:48.630 make sure what we're doing in that part is correct. 04:48.630 --> 04:50.670 The second piece of this is on the cyber piece, 04:50.670 --> 04:54.180 and it's we we had a briefing yesterday on a cyber breach, 04:55.210 --> 05:00.210 and it was shocking how disorganized ,unprepared, 05:00.330 --> 05:03.160 and quite frankly utterly clueless 05:03.160 --> 05:06.810 the branch of the military was that had been breached. 05:06.810 --> 05:09.240 Even in this day and age, we still have not figured out 05:09.240 --> 05:13.700 how to put together a cyber policy to protect our assets 05:13.700 --> 05:17.530 in particular with our defense contractors, who we work with 05:17.530 --> 05:20.910 who store our data but don't have adequate protection, 05:20.910 --> 05:23.780 but even within the DoD, 05:23.780 --> 05:28.250 we don't have a clear cohesive policy to put in place. 05:28.250 --> 05:30.090 And the third area of policy we don't have 05:30.090 --> 05:32.800 is we don't have an industrial policy. 05:32.800 --> 05:36.170 And again I think this is a legacy of our dominance. 05:36.170 --> 05:37.540 We didn't have an industrial policy 05:37.540 --> 05:38.740 because we were dominant. 05:38.740 --> 05:41.590 In fact, example from my own neck of the woods, 05:41.590 --> 05:46.210 Boeing, why is Airbus able to be subsidized and dependent? 05:46.210 --> 05:50.360 Well, because decades ago we agreed to allow them, 05:50.360 --> 05:52.100 in many instances, to do that, 05:52.100 --> 05:53.630 and we did that because at the time, 05:53.630 --> 05:58.630 we had like 85% of the global aircraft manufacturing market, 05:58.910 --> 06:00.310 and we thought, well, isn't it cute? 06:00.310 --> 06:01.930 Airbus wants to compete, whatever, 06:01.930 --> 06:03.720 it doesn't really matter to us. 06:03.720 --> 06:05.570 Well, here we are with that flipped. 06:05.570 --> 06:07.670 They've stepped up and competed, 06:07.670 --> 06:10.890 and now we have not come through with a sensible idea 06:10.890 --> 06:15.150 of what technologies, what industries, do we need to protect 06:15.150 --> 06:16.980 for our own national security. 06:18.060 --> 06:21.920 As the chairman will relate, I don't think it's flatware 06:22.890 --> 06:25.450 but that seems to be the one thing that we wind up debating 06:25.450 --> 06:30.020 in the NDAA every year, while meanwhile no offense to those 06:30.020 --> 06:32.370 in the part of the world who consider that important. 06:33.750 --> 06:36.540 Meanwhile we are losing core technologies 06:36.540 --> 06:37.780 that are critical to defense, 06:37.780 --> 06:40.840 and no one really understands exactly why. 06:40.840 --> 06:42.490 The last piece of it, I'll say 06:42.490 --> 06:44.520 that I think is important is trade. 06:45.920 --> 06:47.320 Now we have a somewhat. 06:48.320 --> 06:50.440 I don't know what the word would be. 06:50.440 --> 06:54.180 Unfocused approach right now to how we combat 06:54.180 --> 06:56.150 a competitive trade environment. 06:56.150 --> 06:59.310 The one thing we definitely should be doing is figuring out 06:59.310 --> 07:01.930 how to get on a more level playing field with China. 07:03.160 --> 07:06.200 It's not just our trade deficit with China 07:06.200 --> 07:09.380 but it is the strategies that they have put in place 07:09.380 --> 07:11.880 to capture core technologies, 07:11.880 --> 07:13.590 to steal them in some instances, 07:13.590 --> 07:17.260 but a lot of it they're doing within the WTO framework, 07:17.260 --> 07:20.460 some of it they're doing outside of the WTO framework 07:20.460 --> 07:22.660 but we haven't put together a comprehensive strategy 07:22.660 --> 07:24.440 for changing that equation 07:24.440 --> 07:27.180 whether it's bringing trade actions against them, 07:27.180 --> 07:30.040 whether it's trying to get them to change their policies. 07:30.040 --> 07:33.370 It is sort of a reactionary approach right now. 07:33.370 --> 07:35.550 So we need a strategy in this. 07:35.550 --> 07:37.640 I think this hearing is incredibly important. 07:37.640 --> 07:39.540 I look forward to testimony of the witnesses, 07:39.540 --> 07:41.880 and I thank the chairman for convening it. 07:41.880 --> 07:43.410 I yield back. 07:43.410 --> 07:44.243 - Thank the gentlemen. 07:44.243 --> 07:45.820 Pleased to welcome our witnesses today, 07:45.820 --> 07:47.120 the Honorable Michael Griffin, 07:47.120 --> 07:50.050 undersecretary of defense for research and engineering, 07:50.050 --> 07:51.110 Honorable Kari Bingen, 07:51.110 --> 07:54.280 deputy undersecretary of defense for intelligence, 07:54.280 --> 07:55.610 Mr. Eric Chewning, 07:55.610 --> 07:57.230 deputy assistant secretary of defense 07:57.230 --> 08:00.720 for manufacturing and industrial based policy, 08:00.720 --> 08:02.980 and Mr. Anthony Schinella, 08:02.980 --> 08:06.610 national intelligence officer for military issues. 08:06.610 --> 08:09.770 Thank you all for being here, without objection 08:09.770 --> 08:11.460 your written statement, 08:11.460 --> 08:13.490 it looks like there's just one to me, 08:13.490 --> 08:16.250 will be made part of the record, 08:16.250 --> 08:19.880 and we will turn it over to y'all 08:19.880 --> 08:21.710 for comments you'd like to make. 08:21.710 --> 08:24.250 Mr. Schinella, you're starting first is that? 08:26.850 --> 08:27.930 Oh. 08:27.930 --> 08:28.930 Y'all figure it out. 08:29.860 --> 08:32.480 Ms. Secretary, go ahead if you'd like. 08:32.480 --> 08:33.740 - [Michael] I believe the earlier agreement 08:33.740 --> 08:34.803 was that I would start. 08:34.803 --> 08:39.070 - Oh, great. 08:39.070 --> 08:41.000 Thank you, first of all, Chairman Thornberry, 08:41.000 --> 08:44.110 Ranking Member Smith, members of this committee, 08:44.110 --> 08:47.240 we appear before you to discuss 08:47.240 --> 08:49.970 the very real Chinese adversarial behavior 08:49.970 --> 08:51.380 to which you have referred. 08:52.840 --> 08:55.980 And this is not about the threat of such behavior, 08:55.980 --> 08:57.890 this is real behavior. 08:57.890 --> 09:01.520 We are here to underscore the urgency with which all of us 09:01.520 --> 09:05.450 must focus our actions to maintain our technological 09:05.450 --> 09:06.760 and military dominance. 09:07.900 --> 09:10.730 I thank you for the trust you've placed in myself 09:10.730 --> 09:13.230 and my fellow witnesses to discuss this topic 09:14.090 --> 09:18.600 in this open setting as carefully as we can. 09:20.090 --> 09:24.370 We did, yes sir, we did submit a single joint statement 09:24.370 --> 09:29.370 because we wanted to be together rather than separate. 09:30.150 --> 09:32.350 I think we have a common view of this topic, 09:33.500 --> 09:37.290 but our conversation today is only a handful of pixels 09:37.290 --> 09:39.580 in the entire picture of what we face. 09:40.810 --> 09:44.540 It is my, and I believe our, deep belief 09:44.540 --> 09:47.890 that we must act now, but at the same time, 09:47.890 --> 09:50.170 it's my duty to limit my comments to those 09:50.170 --> 09:51.870 of a strictly unclassified nature, 09:53.270 --> 09:57.440 so as we go forward I welcome, expect, and encourage 09:57.440 --> 10:00.950 more detailed discussions in a more restricted environment. 10:00.950 --> 10:02.860 I believe this will be necessary 10:02.860 --> 10:04.360 in the months and years ahead. 10:05.380 --> 10:08.160 This is not a problem with a short-term fix, sir, 10:10.950 --> 10:15.790 we are here in part to recognize that this is a whole 10:15.790 --> 10:19.120 of government indeed a whole of society problem, 10:19.120 --> 10:22.290 and we're here in part to recognize and draw distinctions 10:22.290 --> 10:24.470 between adversaries and allies according 10:24.470 --> 10:26.140 to the behavior of the actor. 10:27.330 --> 10:29.860 No one believes more strongly than I 10:29.860 --> 10:33.260 in the value of international partnerships and alliances, 10:33.260 --> 10:35.290 and in the value of international commerce 10:35.290 --> 10:37.180 and fair exchange, 10:37.180 --> 10:38.690 but the Chinese theft 10:38.690 --> 10:40.820 of technology and intellectual property 10:40.820 --> 10:43.790 through the exfiltration of the work of others 10:43.790 --> 10:46.330 is not unlike the Chinese construction of islands 10:46.330 --> 10:49.000 to encroach upon the geographic domains 10:49.000 --> 10:50.160 of international waters 10:50.160 --> 10:52.470 and those of other sovereign nations. 10:52.470 --> 10:55.530 It circumvents the autonomy of nations in a departure 10:55.530 --> 10:57.900 from a rules-based global order. 10:57.900 --> 10:59.820 It is adversarial behavior, 10:59.820 --> 11:02.020 and its perpetrator must be treated as such. 11:03.340 --> 11:05.510 The breadth and depth of Chinese malfeasance 11:05.510 --> 11:08.010 with regard not only to our technology 11:08.010 --> 11:11.310 but also to our larger economy and our nation 11:11.310 --> 11:13.170 is significant and intentional 11:14.180 --> 11:17.180 as referenced in our written testimony. 11:17.180 --> 11:18.880 We are taking steps to counter it. 11:20.140 --> 11:22.440 You, as the congress, have established my office, 11:22.440 --> 11:24.990 in particular, to regain and maintain 11:24.990 --> 11:27.300 the technological dominance that we, as a nation, 11:27.300 --> 11:29.740 have depended upon in the past. 11:29.740 --> 11:31.990 We pledge to you to do that, 11:31.990 --> 11:34.500 and with your help and support, we will. 11:34.500 --> 11:36.550 Thank you, and I look forward to your questions. 11:36.550 --> 11:38.560 I yield to my colleagues. 11:42.310 --> 11:45.210 - Mr. Chairman Thornberry, Ranking Member Smith, 11:45.210 --> 11:47.570 and all members of this distinguished committee. 11:47.570 --> 11:50.270 Good morning, and thank you for welcoming here 11:50.270 --> 11:52.730 to discuss this important topic. 11:52.730 --> 11:56.490 As a DNI national intelligence officer for military issues, 11:56.490 --> 11:58.260 I am regularly tasked with reporting 11:58.260 --> 12:00.610 on threats to the US military. 12:00.610 --> 12:02.200 There are of course the visible threats 12:02.200 --> 12:05.380 from foreign military forces and weapon systems, 12:05.380 --> 12:07.450 but US intelligence community 12:07.450 --> 12:10.810 also sees a less visible but dual threat 12:10.810 --> 12:12.520 from adversaries and competitors 12:12.520 --> 12:14.580 that are deliberately working 12:14.580 --> 12:19.000 to acquire US research, technologies, and talent 12:19.880 --> 12:22.010 to improve their own military programs, 12:22.870 --> 12:25.390 and erode the effectiveness of ours. 12:25.390 --> 12:29.650 More broadly the ICSS is that foreign countries acquisition 12:29.650 --> 12:33.380 of US technology through licit and illicit means, 12:33.380 --> 12:36.500 as well as cheating on trade agreements, joint ventures, 12:36.500 --> 12:39.290 and exploiting scientific collaborations 12:39.290 --> 12:42.830 have the potential to erode the US competitive edge. 12:43.780 --> 12:46.480 Foreign countries, most notably China, 12:47.370 --> 12:50.690 are able to acquire and transfer critical US technology 12:50.690 --> 12:52.880 through their intelligence services, 12:52.880 --> 12:56.420 foreign direct investments, joint ventures, 12:56.420 --> 12:59.630 open-source science and technology acquisition programs, 12:59.630 --> 13:02.570 use of insiders, front companies, 13:02.570 --> 13:04.720 and scientific and business collaborations. 13:05.990 --> 13:09.030 This has potentially far-reaching consequences. 13:09.030 --> 13:13.050 As we have highlighted in the DNI's Annual Threat Testimony, 13:13.050 --> 13:16.560 persistent trade imbalances, trade barriers, 13:16.560 --> 13:19.460 and a lack of market friendly policies, in some countries, 13:19.460 --> 13:23.480 probably will continue to challenge US economic security. 13:23.480 --> 13:25.700 Some countries almost certainly will continue 13:25.700 --> 13:28.630 to acquire US intellectual property 13:28.630 --> 13:31.660 and proprietary information illicitly 13:31.660 --> 13:33.170 to advance their own economic 13:33.170 --> 13:35.600 and national security objectives. 13:35.600 --> 13:39.450 China, for example, has acquired proprietary technology 13:39.450 --> 13:43.310 and early-stage ideas through cyber enabled means. 13:43.310 --> 13:44.760 At the same time, some actors 13:44.760 --> 13:48.330 use largely legitimate legal transfers and relationships 13:48.330 --> 13:51.730 to gain access to research fields, experts, 13:51.730 --> 13:54.640 and key enabling industrial processes that could 13:54.640 --> 13:58.310 over time erode America's long-term competitive advantages. 14:00.110 --> 14:04.250 Foreign actors, notably China and Russia, 14:04.250 --> 14:07.030 recognize that investing in and acquiring technology 14:07.030 --> 14:10.310 is absolutely essential to achieve their strategic goals. 14:10.310 --> 14:13.890 They want to develop weapon systems that strike farther, 14:13.890 --> 14:17.750 faster, harder, and more precisely as a means to erode 14:17.750 --> 14:20.890 the traditional pillars of US military strength 14:20.890 --> 14:24.910 and challenge the United States in all warfare domains. 14:24.910 --> 14:27.320 This pursuit of advanced weapon systems 14:27.320 --> 14:29.370 could lead to new means of warfare, 14:29.370 --> 14:32.120 especially robotic and autonomous systems, 14:32.120 --> 14:35.810 operating across land, sea, air, and space domains. 14:36.900 --> 14:39.100 In this capacity, the US intelligence community 14:39.100 --> 14:41.470 has long monitored foreign countries acquisition 14:41.470 --> 14:42.800 of technology outside 14:42.800 --> 14:45.760 of their own indigenous development programs. 14:45.760 --> 14:48.580 Analysis of technology transfer most intuitively 14:48.580 --> 14:50.750 includes tracking a country's acquisition 14:50.750 --> 14:55.000 of a key technology or component openly or illicitly 14:55.000 --> 14:56.280 but also includes understanding 14:56.280 --> 14:59.700 of how actors assess technical specifications, 14:59.700 --> 15:01.390 design or engineering skills, 15:01.390 --> 15:03.670 and manufacturing and production techniques. 15:04.570 --> 15:06.820 These kinds of technology transfers can allow a country 15:06.820 --> 15:09.550 to speed up or lower the cost of development projects 15:09.550 --> 15:11.630 because they can bypass or trim 15:11.630 --> 15:15.230 the costly research and development stages. 15:15.230 --> 15:16.720 These acquisitions can not only 15:16.720 --> 15:19.320 improve foreign military capabilities 15:19.320 --> 15:21.670 but can also accrue to them economic benefits. 15:23.130 --> 15:26.480 In this, China is the embodiment 15:26.480 --> 15:29.330 of the military technology transfer challenge. 15:29.330 --> 15:31.870 The Chinese government has a comprehensive strategy 15:31.870 --> 15:34.350 for technology modernization 15:34.350 --> 15:37.170 to bolster Chinese international image, 15:37.170 --> 15:39.460 fosters national economic growth, 15:39.460 --> 15:42.090 and improve its military modernization, 15:43.260 --> 15:45.720 and technology acquisition for the United States 15:45.720 --> 15:48.390 is definitely part of that comprehensive strategy. 15:49.450 --> 15:52.300 For some time Beijing has articulated industrial policies 15:52.300 --> 15:54.320 and long term objectives contained in a number 15:54.320 --> 15:57.160 of comprehensive national development plans, 15:57.160 --> 15:59.570 such as its well known Five-Year Plans 15:59.570 --> 16:03.290 and its Made in China 2025 initiative. 16:03.290 --> 16:05.990 In these plans, Beijing has shown that it is interested 16:05.990 --> 16:08.410 in acquiring technology and expertise that is 16:08.410 --> 16:11.330 of critical economic or national security importance 16:11.330 --> 16:13.490 to the United States. 16:13.490 --> 16:15.100 In its most recent five-year plan, 16:15.100 --> 16:18.560 Beijing identified its most critical technology priorities 16:18.560 --> 16:23.040 including clean energy, aerospace and deep-sea research, 16:23.040 --> 16:26.260 computer and information technology, and manufacturing. 16:27.680 --> 16:30.380 China's, therefore, prioritizing investment in 16:30.380 --> 16:33.520 and acquisition of critical future technologies 16:33.520 --> 16:35.870 that will be foundations for future innovations 16:35.870 --> 16:39.140 both for commercial and military innovations, 16:39.140 --> 16:41.950 like artificial intelligence, robotics, 16:41.950 --> 16:45.590 autonomous vehicles, augmented and virtual reality, 16:45.590 --> 16:48.480 financial technology, and gene-editing. 16:48.480 --> 16:51.180 These technologies are inherently dual use, 16:51.180 --> 16:52.660 making it difficult to draw a line 16:52.660 --> 16:56.190 between commercial versus military applications. 16:56.190 --> 16:58.690 These technologies are also likely to be foundational 16:58.690 --> 17:01.460 to future innovations and essential to the next wave 17:01.460 --> 17:03.880 of competitive high technology products. 17:05.000 --> 17:08.200 China's development strategy is multifaceted, 17:08.200 --> 17:10.520 and its supporting infrastructure is robust. 17:10.520 --> 17:12.850 China uses multiple vectors to acquire 17:12.850 --> 17:14.650 the skills and know-how it seeks, 17:14.650 --> 17:17.300 and I would like to highlight a few of these for you. 17:18.280 --> 17:22.230 One is joint ventures, mergers and acquisitions. 17:22.230 --> 17:24.730 Tech transfer to China is occurring in part 17:24.730 --> 17:27.960 through increased levels of investment and acquisitions 17:27.960 --> 17:31.750 of US companies, which hit a record level in 2016 17:31.750 --> 17:34.130 before dropping somewhat in 2017 17:34.130 --> 17:36.840 and again in the first half of 2018. 17:36.840 --> 17:39.520 China's aggregate investment in US technology 17:39.520 --> 17:43.270 over the past decade, from 2007 to '17, 17:43.270 --> 17:45.400 totaled approximately $40 billion 17:45.400 --> 17:49.040 and was about $5.3 billion last year. 17:49.940 --> 17:51.950 And because the Chinese Communist Party 17:51.950 --> 17:54.700 is intimately involved in planning economic activity 17:54.700 --> 17:56.340 in supporting companies, 17:56.340 --> 17:59.020 there is great deal of coordinated investment 17:59.020 --> 18:01.950 along with other vehicles of technology transfer 18:01.950 --> 18:04.270 to accomplish China's larger stated goals. 18:05.240 --> 18:08.170 Another vehicle, our research partnerships 18:08.170 --> 18:10.890 and academic collaborations. 18:10.890 --> 18:13.650 Foreign governments often use every means at their disposal 18:13.650 --> 18:16.490 to secure an advantage in technological areas, 18:16.490 --> 18:19.080 and their exploitation of academics and researchers 18:19.080 --> 18:22.160 at US colleges, national laboratories, 18:22.160 --> 18:25.180 and other institutions is one of those means. 18:25.180 --> 18:27.340 China actively seeks partnerships 18:27.340 --> 18:29.480 with government laboratories to learn about 18:29.480 --> 18:32.620 and acquire specific technology 18:32.620 --> 18:36.200 and the soft skills necessary to run such facilities. 18:36.200 --> 18:38.840 China also uses collaborations and relationships 18:38.840 --> 18:42.440 with universities to acquire specific research and access 18:42.440 --> 18:44.060 to high-end research equipment. 18:45.960 --> 18:49.150 Another vector are science and technology investments. 18:49.150 --> 18:52.750 Beijing has sustained long-term state investments 18:52.750 --> 18:54.950 in its S and T infrastructure, 18:54.950 --> 18:57.800 and China leverages international collaborations 18:57.800 --> 19:00.430 with key pieces of this S and T infrastructure 19:00.430 --> 19:03.210 to gain technology and know-how. 19:03.210 --> 19:06.100 In 2017 China's spending on research and development 19:06.100 --> 19:09.520 was estimated at $279 billion, 19:10.600 --> 19:13.120 up more than 70% from 2010. 19:14.990 --> 19:18.940 Another mechanism, our talent recruitment programs. 19:18.940 --> 19:22.150 Beijing runs multiple talent recruitment programs 19:22.150 --> 19:25.920 specifically focused on recruiting global experts 19:25.920 --> 19:28.030 who can facilitate the transfer 19:28.030 --> 19:32.600 of foreign technology intellectual property and know-how 19:32.600 --> 19:35.510 to advance China's science, technology, 19:35.510 --> 19:38.380 and military modernization goals. 19:38.380 --> 19:39.810 China uses these programs, 19:39.810 --> 19:42.950 such as its Thousand Talents Program, 19:42.950 --> 19:46.790 to recruit Western-trained experts to work in China 19:46.790 --> 19:48.860 on key strategic programs. 19:48.860 --> 19:52.080 Beijing also has employed Western-trained returnees 19:52.080 --> 19:54.330 to implement important changes 19:54.330 --> 19:57.770 in its science, engineering, and math curricula 19:57.770 --> 20:00.430 that foster greater creativity and applied skills 20:00.430 --> 20:02.930 at China's top-tier universities. 20:04.820 --> 20:08.060 Another mechanism exploits is the legal 20:08.060 --> 20:10.520 and regulatory environment. 20:10.520 --> 20:13.980 China consciously uses its laws and regulations 20:13.980 --> 20:16.850 in ways that can disadvantage US companies 20:16.850 --> 20:18.930 and advantage its own companies. 20:18.930 --> 20:22.420 The Chinese government uses foreign ownership restrictions, 20:22.420 --> 20:25.620 such as formal and informal restrictions, 20:25.620 --> 20:28.320 to require or pressure technology transfer 20:28.320 --> 20:31.670 from US companies to Chinese entities. 20:31.670 --> 20:33.130 The Chinese government also uses 20:33.130 --> 20:35.940 its administrative licensing and approvals process 20:35.940 --> 20:38.850 to force technology transfer in exchange 20:38.850 --> 20:40.910 for the numerous administrative approvals 20:40.910 --> 20:43.880 needed to establish and operate a business in China. 20:45.700 --> 20:48.820 We also assess China will use cyber espionage 20:48.820 --> 20:52.030 and bolster its cyber attack capabilities 20:52.030 --> 20:54.420 to support national security priorities, 20:54.420 --> 20:57.010 which include technology acquisition. 20:57.010 --> 20:58.670 The IC and private sector experts 20:58.670 --> 21:03.670 continue to identify ongoing cyber activity from China. 21:04.330 --> 21:07.440 Most detected cyber operations against US private industry 21:07.440 --> 21:10.160 are focused on clear defense contractors 21:10.160 --> 21:12.320 or IT and communications firms, 21:12.320 --> 21:15.440 whose products and services support government 21:15.440 --> 21:17.900 and private sector networks worldwide. 21:19.750 --> 21:23.200 And China's technology transfer mechanisms are paired 21:23.200 --> 21:27.990 with Beijing's parallel strategy of military civilian fusion 21:27.990 --> 21:32.350 that expands civil military integration of defense 21:32.350 --> 21:35.250 and industrial bases to facilitate the construction 21:35.250 --> 21:37.300 of a national infrastructure 21:37.300 --> 21:40.690 connecting the PLA, state-owned defense research, 21:40.690 --> 21:43.190 development and manufacturing enterprises, 21:43.190 --> 21:45.300 and government agencies 21:45.300 --> 21:46.260 under the State Council, 21:46.260 --> 21:48.210 universities, and private sector firms. 21:48.210 --> 21:50.310 We assess that these collaborative partnerships 21:50.310 --> 21:54.100 have well-supported Beijing's rapid military modernization, 21:55.588 --> 21:58.450 so what are the possible long-term consequences? 21:58.450 --> 22:01.210 Well, while the most immediate and visible effects 22:01.210 --> 22:03.880 may be related to particular military technologies, 22:03.880 --> 22:07.590 the long-term consequences could be much broader. 22:07.590 --> 22:10.290 A decline of the United States' advantage in key technology 22:10.290 --> 22:14.150 could affect our ability to set global norms and regulations 22:14.150 --> 22:17.260 for technology, control access to technology 22:17.260 --> 22:20.960 for military purposes, and reap the economic benefits 22:20.960 --> 22:23.170 we derive from commercialization. 22:23.170 --> 22:25.570 If the US were to lose its technological edge, 22:25.570 --> 22:26.990 the associated loss of influence 22:26.990 --> 22:28.740 would have far-reaching implications 22:28.740 --> 22:32.150 beyond scientific disciplines to include economic, social, 22:32.150 --> 22:34.710 political, and security dynamics. 22:35.900 --> 22:38.060 Within the ODNI, we are facilitating 22:38.060 --> 22:41.330 the information exchange among the organizations responsible 22:41.330 --> 22:43.970 for the analysis of technology transfer, 22:43.970 --> 22:47.260 'cause this issue is global and multifunctional 22:47.260 --> 22:48.820 in reach and nature. 22:48.820 --> 22:49.880 We collaborate closely 22:49.880 --> 22:52.310 across the intelligence, counterintelligence, 22:52.310 --> 22:54.570 and law enforcement communities, 22:54.570 --> 22:56.740 as well as other national agencies 22:57.880 --> 23:00.600 in multiple ad hoc groups and formal groups 23:00.600 --> 23:03.180 working on specific technology transfer issues. 23:03.180 --> 23:05.840 We regularly develop collection requirements 23:05.840 --> 23:10.100 and provide warning in the form of intelligence products 23:10.100 --> 23:12.590 of threats associated with technology transfer. 23:13.540 --> 23:15.860 This concludes my overview of the threats 23:15.860 --> 23:18.250 posed by military technology transfers, 23:18.250 --> 23:20.230 and I will now turn to my colleagues to continuing 23:20.230 --> 23:23.490 with remarks on the impacts of these foreign activities 23:23.490 --> 23:26.860 on the US and measures we are taking for it and deter them. 23:26.860 --> 23:27.860 Thank you very much. 23:30.820 --> 23:33.340 - Thank you, Chairman Thornberry, Ranking Member Smith, 23:33.340 --> 23:34.780 and members of the committee, 23:34.780 --> 23:36.170 it is a privilege to be back; although, 23:36.170 --> 23:39.020 it's a bit of a different viewpoint from down here. 23:39.020 --> 23:41.250 I was (chuckles) really honored to support you 23:41.250 --> 23:43.470 in all the vital national security work you do 23:43.470 --> 23:45.970 and was fortunate to see firsthand the bipartisan approach 23:45.970 --> 23:47.350 that you took the national security 23:47.350 --> 23:50.000 and providing for our military, so thank you. 23:50.000 --> 23:52.930 In my new role, I support the undersecretary of defense 23:52.930 --> 23:55.970 for intelligence as he carries out his lead Responsibilities 23:55.970 --> 23:58.960 within the department on behalf of the secretary 23:58.960 --> 24:02.100 for both intelligence and security, 24:02.100 --> 24:04.260 executing the National Defense Strategy 24:04.260 --> 24:05.990 including its direction to protect 24:05.990 --> 24:08.970 the national security innovation base. 24:08.970 --> 24:10.880 As you heard from my ODNI colleague, 24:10.880 --> 24:13.860 the Department of Defense is facing unprecedented threats 24:13.860 --> 24:16.620 to its technological and industrial base 24:16.620 --> 24:18.710 putting at risk the capabilities critical 24:18.710 --> 24:21.340 to maintaining our military advantage. 24:21.340 --> 24:24.270 China, in particular, has made it a national goal 24:24.270 --> 24:27.230 to acquire foreign technologies to advance its economy 24:27.230 --> 24:29.770 and to modernize its military. 24:29.770 --> 24:33.780 It is comprehensively targeting advanced US technologies, 24:33.780 --> 24:36.190 and the people, the information, businesses, 24:36.190 --> 24:38.820 and research institutions that underpin them. 24:39.840 --> 24:42.420 It is playing the long game using a variety 24:42.420 --> 24:44.540 of different methods to steal our information, 24:44.540 --> 24:47.280 circumvent our processes, and exploit our seams. 24:48.700 --> 24:51.240 Across the defense intelligence and security enterprise 24:51.240 --> 24:55.080 that the USD(I) oversees, we are making significant changes 24:55.080 --> 24:58.880 in our approach to industrial and to information security 24:58.880 --> 25:00.890 as well as to counterintelligence. 25:00.890 --> 25:01.990 I welcome the opportunity 25:01.990 --> 25:04.000 to follow up with you in a classified session 25:04.000 --> 25:07.080 to discuss additional initiatives we are undertaking 25:07.080 --> 25:10.020 that will provide you with a more holistic picture. 25:10.020 --> 25:11.460 In our unclassified forum today, 25:11.460 --> 25:14.520 I'll touch briefly on four key lines of effort. 25:14.520 --> 25:17.820 First, we are elevating the private sectors' focus 25:17.820 --> 25:19.610 on security through an initiative 25:19.610 --> 25:21.710 called Deliver Uncompromised. 25:21.710 --> 25:23.740 We must have confidence that industry 25:23.740 --> 25:27.550 is delivering capabilities, technologies, and weapon systems 25:27.550 --> 25:30.070 that are uncompromised by our adversaries, 25:30.070 --> 25:32.570 secure from cradle-to-grave. 25:32.570 --> 25:35.160 It is no longer sufficient to only consider cost, 25:35.160 --> 25:36.300 schedule, and performance 25:36.300 --> 25:38.430 when acquiring defense capabilities. 25:38.430 --> 25:41.330 We must establish security as a fourth pillar 25:41.330 --> 25:44.590 in defense acquisition, and also create incentives 25:44.590 --> 25:46.450 for industry to embrace security 25:46.450 --> 25:49.240 not as a cost burden but as a major factor 25:49.240 --> 25:51.840 in their competitiveness for US government business. 25:53.000 --> 25:55.910 Second, through the Defense Security Service, 25:55.910 --> 25:58.460 we are implementing a more comprehensive approach 25:58.460 --> 26:00.940 to industrial and information security. 26:00.940 --> 26:04.660 We are transitioning from a compliance checklist-based 26:04.660 --> 26:06.800 National Industrial Security Program 26:06.800 --> 26:09.960 to a risk-based approach informed by the threat 26:09.960 --> 26:13.330 and the department's technology protection priorities; 26:13.330 --> 26:15.990 however, safeguarding our clear defense contractors 26:15.990 --> 26:19.120 only protects part of our defense industrial base. 26:19.120 --> 26:21.060 The increasing ease of access to large amounts 26:21.060 --> 26:23.140 of unclassified and non-government data 26:23.140 --> 26:26.010 in the defense industrial base offers opportunities 26:26.010 --> 26:29.770 for exploitation, which in aggregation can be as damaging 26:29.770 --> 26:32.200 as a breach of classified information. 26:32.200 --> 26:33.720 To narrow this gap 26:33.720 --> 26:35.620 between protecting classified information 26:35.620 --> 26:38.260 and that unprotected unclassified information, 26:38.260 --> 26:40.050 we're developing a program protection plan 26:40.050 --> 26:43.330 to cover controlled unclassified information, 26:43.330 --> 26:44.700 including identifying the policy 26:44.700 --> 26:47.090 and resources necessary to do this. 26:47.090 --> 26:49.900 Third, using authorities provided by this committee 26:49.900 --> 26:54.037 including Section 806 of the Fiscal Year 2011 NDAA 26:54.037 --> 26:57.210 and Section 1696 of last year's NDAA, 26:57.210 --> 27:00.360 we are strengthening the integrity of the supply chain 27:00.360 --> 27:02.030 as well as establishing a pilot program 27:02.030 --> 27:03.440 to enhance information sharing 27:03.440 --> 27:05.660 with clear defense contractors. 27:05.660 --> 27:07.420 And fourth, we are enhancing 27:07.420 --> 27:09.210 our counterintelligence capabilities 27:09.210 --> 27:12.390 to better address the non-traditional collection methods 27:12.390 --> 27:14.600 being employed by our adversaries. 27:14.600 --> 27:15.710 We are adding security 27:15.710 --> 27:17.790 and counterintelligence personnel resources 27:17.790 --> 27:21.690 to the Defense Security Service, NCIS, Air Force, 27:21.690 --> 27:24.900 Office of Special Investigations, and the Army CI. 27:24.900 --> 27:26.450 Our defense intelligence components 27:26.450 --> 27:29.640 are augmenting their collection and analysis capabilities 27:29.640 --> 27:31.670 to gain a more comprehensive understanding 27:31.670 --> 27:33.510 of threats to our technologies, 27:33.510 --> 27:35.030 which will improve our intelligence support 27:35.030 --> 27:38.830 to export control reviews and CFIUS transactions. 27:38.830 --> 27:42.500 Lastly, we are increasingly relying on our partnerships 27:42.500 --> 27:44.130 with FBI, not just increasingly 27:44.130 --> 27:45.610 but we must rely on our partnerships 27:45.610 --> 27:48.660 with the FBI, Homeland Security, and other departments 27:48.660 --> 27:50.650 to actively leverage both our individual 27:50.650 --> 27:52.680 and our collective authorities to protect 27:52.680 --> 27:55.010 the nation's critical technologies. 27:55.010 --> 27:56.420 Through these four lines of effort, 27:56.420 --> 27:57.730 we can help mitigate the threats 27:57.730 --> 27:59.820 to our technology and information critical 27:59.820 --> 28:02.290 to our military advantage, and by doing so, 28:02.290 --> 28:05.630 deliver uncompromised capabilities to our warfighters. 28:05.630 --> 28:08.700 We recognize that strong relationships with industry across 28:08.700 --> 28:10.940 the interagency with our allies and partners 28:10.940 --> 28:13.400 and with congress are essential to that success. 28:13.400 --> 28:15.520 We thank you for your continued focus on the threat, 28:15.520 --> 28:17.860 your understanding of the impact to our warfighters 28:17.860 --> 28:19.810 and their capabilities, and your commitment 28:19.810 --> 28:22.260 to support our policies, programs, and the resources 28:22.260 --> 28:24.480 necessary to maintain our advantage. 28:24.480 --> 28:26.130 I look forward to your questions. 28:28.890 --> 28:30.740 - Mr. Chairman, Ranking Member Smith, 28:30.740 --> 28:33.450 and members of the committee, thank you for the opportunity 28:33.450 --> 28:35.410 to speak with you all this morning. 28:35.410 --> 28:37.670 I serve as the principal advisor of the undersecretary 28:37.670 --> 28:40.970 of defense for acquisition and sustainment on DoD policies 28:40.970 --> 28:43.770 for the maintenance of the US defense industrial base. 28:43.770 --> 28:44.820 This includes assessing 28:44.820 --> 28:48.170 the national security impact of foreign investments. 28:48.170 --> 28:50.540 Our national defense strategy outlines a handful 28:50.540 --> 28:52.720 of critical technologies necessary 28:52.720 --> 28:55.210 for maintaining US military dominance 28:55.210 --> 28:57.610 in an era of great power competition. 28:57.610 --> 29:00.800 For those capabilities with unique military applications, 29:00.800 --> 29:03.430 like missile defense and nuclear forces, 29:03.430 --> 29:05.380 the Department of Defense will continue to act 29:05.380 --> 29:10.380 as our nation's sole developer and technological first mover 29:10.410 --> 29:12.020 but for those emerging technologies 29:12.020 --> 29:14.480 with both military and commercial uses, 29:14.480 --> 29:17.500 like artificial intelligence, we will also need to be 29:17.500 --> 29:20.810 a fast follower, an adapter of commercial sector innovation; 29:21.650 --> 29:24.780 therefore, force structure modernization requires support 29:24.780 --> 29:28.150 from both our heritage and legacy 29:28.150 --> 29:30.310 and commercial defense industrial base. 29:31.500 --> 29:34.250 Chinese industrial policies of economic aggression, 29:34.250 --> 29:36.860 such as investment driven technology transfer, 29:36.860 --> 29:39.260 and a legal intellectual property theft 29:39.260 --> 29:40.930 pose a multi-faceted threat 29:40.930 --> 29:44.300 to our entire national security innovation base. 29:44.300 --> 29:46.010 A threat with the potential to create 29:46.010 --> 29:48.850 both long and short term impacts. 29:48.850 --> 29:50.040 In the short term, 29:50.040 --> 29:52.390 their attempts to steal intellectual property, 29:52.390 --> 29:54.380 compromise our defense supply chain, 29:54.380 --> 29:55.780 and create economic dependence 29:55.780 --> 29:58.250 within the sub-tier of our industrial base 29:58.250 --> 30:02.590 chips away our relative military technological advantage. 30:02.590 --> 30:05.860 Over the longer term spurred on by strategic initiatives, 30:05.860 --> 30:09.160 like One Belt One Road, civil-military fusion, 30:09.160 --> 30:12.630 and Made in China 2025, this potential for China 30:12.630 --> 30:16.890 to erode our underlying innovation and industrial advantage. 30:16.890 --> 30:18.530 The engine of our national defense 30:18.530 --> 30:20.850 has always been the strength of our economy. 30:20.850 --> 30:23.080 Chinese policies seek to extract technologies 30:23.080 --> 30:26.350 from Western institutions, leverage our educational system 30:26.350 --> 30:29.010 to develop its own workforce, and use subsidies 30:29.010 --> 30:31.840 and non-tariff barriers to prevent competition 30:31.840 --> 30:34.570 and to enable the creation of national champions. 30:34.570 --> 30:37.210 These national champions enjoy a protected domestic market 30:37.210 --> 30:39.920 which they'll use to their relative advantage 30:39.920 --> 30:42.600 and enable them to grow at speed and scale, 30:42.600 --> 30:45.050 and then use all the elements, the communist state, 30:45.050 --> 30:47.190 to place their national commercial champions 30:47.190 --> 30:50.030 at the top of critical markets and industries globally. 30:50.870 --> 30:53.320 These commercial national actors are then directed 30:53.320 --> 30:55.290 to compete globally against the United States 30:55.290 --> 30:57.570 and Western firms while being given 30:57.570 --> 30:58.850 every subsidy and benefit 30:58.850 --> 31:01.530 that the authoritarian communist government can devise 31:01.530 --> 31:04.520 with the goal of marginalizing US companies. 31:04.520 --> 31:06.910 Combating these predatory economics require a whole 31:06.910 --> 31:09.180 of nation approach to both protect 31:09.180 --> 31:11.160 and promote American industry, 31:11.160 --> 31:14.050 as well as our like-minded allies and partners. 31:14.050 --> 31:16.550 From a defense industrial policy perspective, 31:16.550 --> 31:17.870 this includes modernization 31:17.870 --> 31:19.780 of the complementary protection measures 31:19.780 --> 31:23.210 of CFIUS and export controls as well as increasing 31:23.210 --> 31:25.440 the private sectors focus on cybersecurity. 31:26.440 --> 31:28.500 On the promote side of the ledger, 31:28.500 --> 31:30.780 we need to make sure the department is a customer of choice 31:30.780 --> 31:32.920 for emerging technology providers. 31:32.920 --> 31:35.490 This will require acquisition processes that operate 31:35.490 --> 31:38.420 at the speed of relevance, as well as budget stability, 31:38.420 --> 31:41.360 so we can send a clear demand signal to industry. 31:41.360 --> 31:42.760 Thank you very much for the opportunity 31:42.760 --> 31:44.770 to testify on this important topic, 31:44.770 --> 31:46.870 and I look forward to answering your questions. 31:49.530 --> 31:53.960 - Let me just ask, as I mentioned at the beginning, 31:53.960 --> 31:58.810 one of the issues with which we will deal in conference 31:58.810 --> 32:03.430 is a modernization of the CFIUS Process, 32:03.430 --> 32:04.490 that has been added 32:04.490 --> 32:08.110 to the Senate Defense Authorization Bill. 32:08.110 --> 32:11.460 There is an effort in the house to not only update CFIUS 32:11.460 --> 32:13.670 but also the export control regime, 32:15.060 --> 32:18.480 which may be considered fairly soon in the House Floor. 32:18.480 --> 32:21.380 Regardless this issue is before us, 32:21.380 --> 32:26.380 and what guidance can any of you 32:27.400 --> 32:32.190 give us as far as the updating 32:32.190 --> 32:35.280 of CFIUS and export controls? 32:37.090 --> 32:38.470 - I'm happy to take that first. 32:38.470 --> 32:40.120 Mr. chairman, and I'm sure my colleagues 32:40.120 --> 32:41.910 would also like to add on 32:41.910 --> 32:44.310 but we think of CFIUS and export controls 32:44.310 --> 32:47.740 as complementary tools for protecting national security. 32:47.740 --> 32:51.180 Secretaries identified three gaps in the current regime 32:51.180 --> 32:54.560 specifically around tech transfer through joint ventures, 32:54.560 --> 32:57.630 access to technology through non-controlling investments, 32:57.630 --> 33:00.250 an expanded review of leases and real estate purchases, 33:00.250 --> 33:04.660 so we can protect investments near sensitive military sites. 33:04.660 --> 33:06.810 I would suggest to you is that recognizing 33:06.810 --> 33:11.360 that both CFIUS and export controls need to work in concert 33:11.360 --> 33:13.510 to address these three gaps. 33:16.510 --> 33:19.640 - Comment that I would like to make, sir, is that 33:19.640 --> 33:21.560 in the CFIUS process historically, 33:21.560 --> 33:23.290 we look at one deal at a time. 33:24.150 --> 33:27.660 We don't look at the overarching pattern 33:27.660 --> 33:31.720 of such purchases or investments. 33:32.920 --> 33:34.860 I think it is the broader pattern 33:34.860 --> 33:36.710 which is actually of greater concern. 33:37.820 --> 33:40.860 We also don't look at CFIUS investments 33:40.860 --> 33:43.670 or investment candidates from the perspective 33:43.670 --> 33:46.460 of, let me just say, 33:46.460 --> 33:51.130 the intelligence gathering opportunities it offers; 33:51.130 --> 33:54.530 for example, every firm today which, 33:54.530 --> 33:57.850 even if it's not in a technology critical sector, 33:58.970 --> 34:03.970 so let me go to that extreme, but yet such firms 34:04.170 --> 34:08.880 all have highly networked software systems 34:10.000 --> 34:12.840 controlled by commercial operating systems. 34:12.840 --> 34:15.360 Every time that there is a software update 34:15.360 --> 34:16.990 to such an operating system, 34:16.990 --> 34:21.490 it affords another intrusion path into domestic networks. 34:22.530 --> 34:25.840 We don't look at Chinese investments from the perspective 34:25.840 --> 34:28.100 of the mischief that might be made 34:28.100 --> 34:32.090 simply by having foreign ownership, 34:32.090 --> 34:36.710 and in some cases control of such avenues. 34:36.710 --> 34:38.040 So I'll leave it at that. 34:38.040 --> 34:41.420 I believe that's as far as I would wanna go at this point. 34:41.420 --> 34:44.400 - So my conclusion from that is we need 34:44.400 --> 34:46.550 to update CFIUS and export controls, 34:46.550 --> 34:48.860 but it doesn't fix all the problems. 34:48.860 --> 34:50.440 - [Michael] It does not remotely stop there, 34:50.440 --> 34:52.450 sir, in my opinion. 34:52.450 --> 34:53.283 - Okay. 34:54.640 --> 34:55.473 Mr. Smith. 34:59.170 --> 35:00.100 - Thank you. 35:00.100 --> 35:02.330 I mentioned in my opening remarks the idea of having 35:02.330 --> 35:03.390 an industrial policy 35:03.390 --> 35:07.030 is what key technologies we should protect. 35:07.030 --> 35:08.420 That's very easy to say, 35:08.420 --> 35:11.600 it's incredibly complicated to implement 35:12.570 --> 35:14.290 in terms of how you do that. 35:14.290 --> 35:16.990 But just what ideas would you have 35:16.990 --> 35:19.830 in terms of what an industrial policy would look like 35:19.830 --> 35:22.160 if we basically geared our trade policy 35:22.160 --> 35:24.680 and our internal investments to make sure 35:24.680 --> 35:28.120 that we were protecting certain core technologies? 35:28.120 --> 35:30.480 I realize you could write a book an answer to this question, 35:30.480 --> 35:34.250 please don't, but if you could just give us 35:34.250 --> 35:35.860 a little bit of a framework of what 35:35.860 --> 35:39.190 an intelligent industrial policy would look like 35:39.190 --> 35:43.150 'cause I think the president has the vague idea 35:43.150 --> 35:47.510 of the problem, and then it's just like all over the place 35:47.510 --> 35:49.310 in terms of how to solve it. 35:49.310 --> 35:51.610 What would a more coherent approach look like? 35:54.620 --> 35:56.500 - Well, I'm not gonna address 35:56.500 --> 36:00.720 any of the back-and-forth chatter in the current environment 36:00.720 --> 36:03.980 because we're talking about a long term strategy here. 36:06.290 --> 36:08.750 We need to recognize that 36:08.750 --> 36:11.720 whether they are specific defense products or not 36:13.500 --> 36:16.400 many things underlie our industrial base. 36:16.400 --> 36:19.250 I might from a large list, as you said sir, 36:19.250 --> 36:21.700 I might pick out, for example, micro-electronics. 36:23.760 --> 36:27.240 We worry about that from the point of view of having 36:27.240 --> 36:30.560 a trusted supply, Kari mentioned 36:32.700 --> 36:36.810 that in her comments, we wanna know that we have 36:36.810 --> 36:41.670 an end-to-end supply of defense equipment, 36:41.670 --> 36:42.760 and I would also say, 36:42.760 --> 36:45.050 commercial equipment that we can trust. 36:48.210 --> 36:51.750 The difficulty in the micro-electronics arena 36:51.750 --> 36:56.750 is that an area in which the US once reigned supreme, 36:57.410 --> 37:01.150 thanks to now 20-some years of Chinese investment, 37:01.150 --> 37:04.690 domestic US manufacturers no longer in all cases 37:04.690 --> 37:07.180 make the best micro-electronics, 37:07.180 --> 37:09.980 so we should be unsurprised when others elsewhere 37:09.980 --> 37:13.960 or anywhere in the world no longer seek to buy from us 37:13.960 --> 37:15.960 but seek to buy the best. 37:15.960 --> 37:18.730 - [Mr. Smith] Okay, can I shift focus on my question 37:18.730 --> 37:19.642 a little bit-- - Yes, sir. 37:19.642 --> 37:22.010 - To help with that, as I mentioned early on, 37:22.010 --> 37:24.140 some of this is inevitable. 37:24.140 --> 37:26.710 I mean the rest of the world was going to catch up. 37:26.710 --> 37:29.760 I think a lot of people underestimate the impact 37:29.760 --> 37:34.130 that World War II had on several decades of us, 37:34.130 --> 37:36.020 the entire industrialized world got blown off 37:36.020 --> 37:38.720 the face of the map and we were the last one standing. 37:39.710 --> 37:41.120 Basically. 37:41.120 --> 37:43.500 If you're gonna fight a war, it's always good to win, 37:43.500 --> 37:45.300 it's even better to win on the road, 37:46.640 --> 37:50.330 and that left us in a very, very strong position 37:50.330 --> 37:53.710 for several decades but that was highly unusual, 37:54.770 --> 37:57.540 so even if China wasn't doing all this nefarious stuff, 37:57.540 --> 37:58.630 and I agree with the Chairman, 37:58.630 --> 38:01.650 we've got to go after the CFIUS Process, 38:01.650 --> 38:03.900 we're gonna have to compete, 38:03.900 --> 38:07.170 and we'll also, I think, part of our industrial policy 38:07.170 --> 38:09.060 is some of what we're gonna need, 38:09.060 --> 38:11.180 we're gonna have to get from someplace else. 38:11.180 --> 38:13.800 So would you say that in my conclusion 38:13.800 --> 38:15.210 that is we need allies? 38:15.210 --> 38:16.860 We need, we need people who have. 38:17.890 --> 38:19.970 I don't think there's anything built in America anymore 38:19.970 --> 38:21.870 that's entirely made America parts 38:21.870 --> 38:24.710 or anything built anywhere for that matter that doesn't rely 38:24.710 --> 38:27.240 on some sort of supply chain, 38:27.240 --> 38:30.876 what could we do better to make that aspect of it work? 38:30.876 --> 38:34.180 To have countries that we can trust and work with? 38:34.180 --> 38:36.130 - Well, then I'll get off that previous path 38:36.130 --> 38:39.590 and refer to my opening remarks where we are today, 38:39.590 --> 38:43.710 not drawing distinctions in our industrial policies 38:43.710 --> 38:46.890 between friends and allies and partners, 38:46.890 --> 38:49.240 and people who behave in an adversarial manner. 38:50.500 --> 38:53.560 It is in our interest to make it easy 38:55.240 --> 38:59.450 for our allies and partners to cooperate and collaborate 38:59.450 --> 39:01.890 with us as opposed to making it easy 39:01.890 --> 39:04.370 for them to collaborate with China; 39:04.370 --> 39:06.720 and it is in our interest, in my opinion, 39:06.720 --> 39:10.100 for us to make it more difficult 39:10.100 --> 39:11.830 for the Chinese to work with us. 39:13.270 --> 39:17.630 During the Cold War, there was a whole of nation policy 39:17.630 --> 39:20.470 such that the idea of doing a commercial deal 39:20.470 --> 39:22.430 with the Soviet Union were words 39:22.430 --> 39:24.860 that didn't fit in one sentence. 39:24.860 --> 39:26.560 We don't have such policies today. 39:27.710 --> 39:30.350 - I'll stop there. - I will. 39:30.350 --> 39:31.730 - Keep it quickly, I've gone on too long. 39:31.730 --> 39:32.720 Go ahead. - Yes, very quickly, 39:32.720 --> 39:34.430 just made to give it a tactical example 39:34.430 --> 39:36.370 of where that collaboration is taking place 39:36.370 --> 39:38.250 is the NDAA enshrined the NTIB, 39:38.250 --> 39:40.080 the National Technical Industrial Base, 39:40.080 --> 39:41.850 which is a partnership between the United States, 39:41.850 --> 39:44.260 Australia, Canada, and the United Kingdom. 39:44.260 --> 39:46.050 We're using that to do a couple of things, 39:46.050 --> 39:48.740 one collectively how can we work together to create 39:48.740 --> 39:51.030 a foreign direct investment screen, 39:52.160 --> 39:55.010 so we can work in concert against predatory economics 39:55.010 --> 39:56.590 from on unallied nations, but then also 39:56.590 --> 39:59.680 to identify areas we can do industrial-based collaboration 39:59.680 --> 40:02.580 to benefit us more broadly. 40:02.580 --> 40:03.690 - [Mr. Smith] Okay. 40:03.690 --> 40:04.720 Thank you. 40:04.720 --> 40:06.480 Sorry, Ms. Bingen, you're head quickly. 40:06.480 --> 40:08.560 - Mr. Smith if I can also tackle that is 40:08.560 --> 40:11.020 from the foxhole where I sit, I see it as my job 40:11.020 --> 40:13.530 to not make it easy for China to get this technology, 40:13.530 --> 40:15.740 and so in my remarks, I hit on four key pieces. 40:15.740 --> 40:18.390 Security's got to be a fourth pillar and acquisition. 40:19.250 --> 40:21.530 In addition to cost schedule performance, 40:21.530 --> 40:22.900 and it's not right now, 40:22.900 --> 40:25.300 and it will be incredibly complex to do. 40:25.300 --> 40:27.400 We've got to put it into the regulations 40:27.400 --> 40:29.450 into the contract mechanisms, et cetera. 40:29.450 --> 40:31.480 Second DSS and transition, 40:31.480 --> 40:32.790 and I'll hit on that in a moment, 40:32.790 --> 40:34.050 integrity of the supply chain 40:34.050 --> 40:36.320 and increasing our CI resources. 40:36.320 --> 40:39.210 DSS and transition, it was amazing to me to see 40:39.210 --> 40:41.080 the approach we take to industrial security today 40:41.080 --> 40:42.930 is a very much checklist-based. 40:42.930 --> 40:45.100 You go into a clear defense contractor, 40:45.100 --> 40:48.130 do you have the alarms, the locks, the safe? 40:48.130 --> 40:50.990 It was not looking holistically at, what is the technology 40:50.990 --> 40:53.350 or capabilities that you're providing to the government? 40:53.350 --> 40:54.190 What is the threat? 40:54.190 --> 40:55.920 What are your vulnerabilities? 40:55.920 --> 40:58.530 And so, they're now based off 40:58.530 --> 41:01.070 of DoD's critical technology priority list 41:01.070 --> 41:03.840 going into these companies that work in these areas 41:03.840 --> 41:06.120 to look more holistically at all those different pieces. 41:06.120 --> 41:08.110 It's probably gonna be uncomfortable for industry, 41:08.110 --> 41:09.640 but we need them as a partner to do this 41:09.640 --> 41:11.510 if we're gonna be able to Deliver Uncompromised. 41:11.510 --> 41:14.210 - Okay, thank you very much, Chair, I yield back. 41:14.210 --> 41:16.030 - [Chair] Mr. Wilson. 41:16.030 --> 41:17.360 - Thank you, Chair Mac Thornberry 41:17.360 --> 41:20.840 for holding this hearing on such an important topic. 41:20.840 --> 41:22.110 Establishing and maintaining 41:22.110 --> 41:25.060 our military's technological edge is imperative 41:25.060 --> 41:27.210 in order to increase their effectiveness 41:27.210 --> 41:31.270 in lethality on the battlefield while protecting our troops. 41:31.270 --> 41:33.250 The department must encourage and protect 41:33.250 --> 41:35.290 research and innovation from being stolen 41:35.290 --> 41:37.560 by state and non-state actors. 41:37.560 --> 41:40.510 I'm concerned by the assessments provided today, 41:40.510 --> 41:42.860 but hopeful by the attention being provided 41:42.860 --> 41:44.030 by Chairman Thornberry 41:44.030 --> 41:46.110 and the House Armed Services Committee. 41:46.110 --> 41:49.700 First, I'd like to welcome back Secretary Kari Bingen 41:49.700 --> 41:53.440 as a alumna of this committee, we appreciate your service, 41:53.440 --> 41:55.040 and I wish you the best, 41:55.040 --> 41:58.880 and so appropriately the first question begins with you, 41:58.880 --> 42:01.310 and the question is, is additional legislation needed 42:01.310 --> 42:03.420 to protect particular technologies 42:03.420 --> 42:05.860 and associated intellectual properties 42:05.860 --> 42:07.630 with military applications? 42:07.630 --> 42:09.280 If so, what technologies 42:09.280 --> 42:11.940 are in the greatest need of protection? 42:11.940 --> 42:14.760 Why would legislation be necessary to protect them? 42:14.760 --> 42:18.560 And how should such legislation provide such protections? 42:20.650 --> 42:23.360 - Thank you, Mr. Wilson, good to be back here. 42:23.360 --> 42:24.830 A couple areas I'd highlight. 42:25.790 --> 42:27.530 There's a Section 806 this year 42:27.530 --> 42:29.660 on extending the authority for us 42:29.660 --> 42:31.000 to strengthen the supply chain. 42:31.000 --> 42:32.240 We think that's a very good measure, 42:32.240 --> 42:34.740 and we're implementing those processes now 42:34.740 --> 42:36.200 to be able to do that and excise out 42:36.200 --> 42:40.020 of the supply chain vulnerabilities. 42:40.020 --> 42:42.110 On the resource front, and we'll have to work 42:42.110 --> 42:44.080 with the committee on the specifics of this, 42:44.080 --> 42:46.910 but on the counterintelligence areas that I talked about, 42:46.910 --> 42:48.970 the greater analysis that we will have to do 42:48.970 --> 42:50.720 with our industry partners 42:50.720 --> 42:53.530 to understand where their threats and vulnerabilities are, 42:53.530 --> 42:55.330 that will require additional resources. 42:55.330 --> 42:56.810 With these CFIUS reforms, 42:56.810 --> 42:58.800 whatever final legislation comes out of that, 42:58.800 --> 43:00.700 that will place an increasing demand signal 43:00.700 --> 43:03.060 on our intelligence capabilities, 43:03.060 --> 43:06.520 so that will require additional resources. 43:06.520 --> 43:07.560 But then also as we go through 43:07.560 --> 43:10.780 this Delivering Uncompromised in DSS and transition 43:10.780 --> 43:15.020 as we look at how we implement protections 43:15.020 --> 43:17.320 on controlled unclassified information, 43:17.320 --> 43:18.430 we may need to come back to you 43:18.430 --> 43:20.530 with specific legislative proposals, 43:20.530 --> 43:22.070 and we'll work with you on that. 43:22.070 --> 43:24.770 - Thank you, and if anyone else would like to respond? 43:27.770 --> 43:30.380 If not, a general question for everybody again, 43:31.220 --> 43:33.900 is this primarily a nation state problem? 43:33.900 --> 43:36.190 What about transnational criminal organizations, 43:36.190 --> 43:39.300 multinational corporations, or terrorist groups 43:39.300 --> 43:42.390 would risk through non-state actors posts and transfers 43:42.390 --> 43:44.830 of US intellectual property and technology? 43:48.480 --> 43:52.230 - Well, sir, those are important issues as well 43:52.230 --> 43:55.600 but the bulk of all the information we have gathered 43:55.600 --> 43:58.700 is that China is the big problem, 43:58.700 --> 44:01.690 and I think we need to focus our efforts 44:01.690 --> 44:05.500 on first taking care of the big problems, 44:05.500 --> 44:10.170 and then absolutely we cannot afford to neglect other areas, 44:10.170 --> 44:11.500 such as you suggest, 44:13.880 --> 44:15.230 but we have to prioritize. 44:17.890 --> 44:19.230 - And then, particulars, 44:19.230 --> 44:22.700 you identified China, the Confucius Institutes, 44:22.700 --> 44:26.320 that are located at a 103 different colleges 44:26.320 --> 44:28.820 and universities across United States. 44:28.820 --> 44:33.810 Many of these are located adjacent to research facilities. 44:33.810 --> 44:35.970 Is anyone familiar with the Confucius Institutes 44:35.970 --> 44:38.610 which has been identified by a member 44:38.610 --> 44:43.290 of the Central Committee of the Communist Party of China 44:43.290 --> 44:45.610 as a very important propaganda arm? 44:45.610 --> 44:47.190 Is anybody familiar with what's being done 44:47.190 --> 44:52.060 to try to identify these Institutes 44:52.060 --> 44:54.280 as to their motives? 44:58.010 --> 45:00.920 - Speaking your original and second question. 45:00.920 --> 45:02.630 Generally, I would agree with my colleagues 45:02.630 --> 45:06.630 that this is predominantly a state actor, a problem, 45:06.630 --> 45:09.540 or at least that certainly the largest most looming problem. 45:09.540 --> 45:14.540 Within that, China is the most the most pressing threat. 45:15.140 --> 45:17.950 With the slight additional amplification that 45:17.950 --> 45:19.680 in a case of a country like China, 45:19.680 --> 45:21.940 you asked about multinational corporations 45:21.940 --> 45:24.620 when you have a state-owned enterprises, 45:24.620 --> 45:27.320 our framework doesn't necessarily capture 45:27.320 --> 45:30.230 that blurred line between the multinational corporation 45:30.230 --> 45:32.840 and a state actor itself. 45:34.070 --> 45:38.810 Well, we are familiar with the Confucius Institutes 45:38.810 --> 45:41.450 as one more visible representation 45:41.450 --> 45:45.280 of China's global presence, including in the United States. 45:48.320 --> 45:49.840 Consistent with my earlier remarks, 45:49.840 --> 45:51.360 I would just note that is just one 45:51.360 --> 45:55.590 of many, many footprints that Beijing has 45:55.590 --> 46:00.340 in, near, and on our campuses and research institutes 46:00.340 --> 46:05.340 that it uses as ways to overtly and less overtly 46:07.440 --> 46:09.400 collect on and maintain awareness of what's happening 46:09.400 --> 46:11.140 on those campuses and institutions. 46:11.140 --> 46:12.720 Thank you sir. 46:12.720 --> 46:13.640 - [Mr. Wilson] And thank each of you, 46:13.640 --> 46:15.940 and we appreciate your service to our country. 46:16.820 --> 46:17.920 - [Chair] Mr. Gallego. 46:19.020 --> 46:21.790 - Thank you, Mr. chair, and thank you to our witnesses. 46:23.070 --> 46:24.240 Even before getting to congress, 46:24.240 --> 46:25.670 I've been hearing about this, reading about this, 46:25.670 --> 46:27.070 and now even more so I'm in congress, 46:27.070 --> 46:30.950 I'm dismayed that I'm hearing about the diagnosis 46:30.950 --> 46:34.920 but not necessarily the the way to fix this. 46:34.920 --> 46:38.310 In the Marine Corps, you have a couple options, right? 46:38.310 --> 46:42.390 To protect yourself, you have your Kevlar, your body armor, 46:42.390 --> 46:44.230 more importantly though, you have your rifle, 46:44.230 --> 46:46.930 and the best way to stop somebody from trying to attack you 46:46.930 --> 46:48.600 is to look tougher and make sure they know 46:48.600 --> 46:50.840 the consequences if they do attack you. 46:50.840 --> 46:53.560 I feel when we're dealing with this issue 46:53.560 --> 46:56.150 that we're talking about how to only play defense, 46:56.150 --> 46:58.620 but what actually are our offensive options 46:58.620 --> 47:03.130 to actually make our quote-unquote enemy understand 47:03.130 --> 47:04.820 that if they do these types of actions 47:04.820 --> 47:06.630 that it's going to be painful? 47:07.550 --> 47:09.000 And obviously, to a certain degree, 47:09.000 --> 47:11.030 I don't want to trigger a war 47:11.030 --> 47:14.240 but we need to be able to have some of the deterrence 47:14.240 --> 47:15.610 so that way they actually have to make 47:15.610 --> 47:17.820 a rational calculation whether or not they're gonna engage 47:17.820 --> 47:18.940 in this type of conduct. 47:18.940 --> 47:20.200 If not, I feel like 47:20.200 --> 47:21.890 this is just gonna continue to happen. 47:21.890 --> 47:24.090 Every year I'm gonna have the same briefing, 47:25.020 --> 47:26.910 and all we're gonna be talking about is about what happened, 47:26.910 --> 47:28.800 and not what we can do to stop 'em, 47:28.800 --> 47:31.650 so I don't know who wants to the question first 47:31.650 --> 47:33.900 but I'd like to hear some some ideas 47:33.900 --> 47:36.280 or if we have to take this to a classified setting, 47:36.280 --> 47:38.300 that's fine too but I'd love to hear it. 47:40.980 --> 47:42.760 And welcome back too. 47:42.760 --> 47:43.780 - Sir, thanks. 47:43.780 --> 47:45.150 If I can start. 47:45.150 --> 47:47.070 Again from an industrial security perspective, 47:47.070 --> 47:48.880 and that's what I'm here to represent, 47:48.880 --> 47:50.630 my focus is on clear defense contractors 47:50.630 --> 47:53.470 and I outlined the four areas, security fourth pillar, 47:53.470 --> 47:55.940 DSS and transition, supply chain integrity, 47:55.940 --> 47:56.940 counterintelligence. 47:57.910 --> 47:58.980 Two other areas... 48:02.340 --> 48:06.260 We are branching out, and as Mr. Schinella highlighted, 48:08.050 --> 48:09.130 there is a deep concern 48:09.130 --> 48:11.060 with a cyber data exfiltration issue, 48:12.090 --> 48:15.230 and it's one that the Chinese in particular are targeting. 48:15.230 --> 48:18.200 So one of the directions that my boss, the undersecretary, 48:18.200 --> 48:20.380 has given to defend security service is to come up with 48:20.380 --> 48:22.650 that program protection plan, come up with the policies 48:22.650 --> 48:24.570 for how we control within industry 48:24.570 --> 48:27.580 that unclassified information yet still may potentially 48:27.580 --> 48:29.190 have some sensitive technical information 48:29.190 --> 48:30.450 or personal information, 48:30.450 --> 48:32.210 so that's one of the areas that we're hitting. 48:32.210 --> 48:33.820 The other one is, absolutely agree with you on, 48:33.820 --> 48:35.330 we are playing defense right now, 48:35.330 --> 48:37.230 particularly in the cyber domain, 48:37.230 --> 48:39.080 and we need to be playing more offense. 48:39.080 --> 48:40.330 We need to be working with the FBI 48:40.330 --> 48:43.070 leveraging their authorities on the law enforcement front, 48:43.070 --> 48:45.860 but that will require a further conversation with you 48:45.860 --> 48:47.190 largely at the classified level 48:47.190 --> 48:48.970 on some of the authorities and resources 48:48.970 --> 48:51.030 that we might need to do that. 48:51.030 --> 48:54.960 - At the unclassified level, I will say that it is 48:54.960 --> 48:59.530 through CFIUS and possibly FIRRMA in the future, 48:59.530 --> 49:02.410 and other mechanisms, 49:02.410 --> 49:06.980 it is our choice as a nation as a matter of national policy 49:06.980 --> 49:10.810 as to whether or not we allow investments 49:10.810 --> 49:14.470 of any magnitude and scope by China in this country-- 49:14.470 --> 49:15.950 - An apology offered, not to cut you off, 49:15.950 --> 49:19.290 but my point, the point that I guess I've made is 49:19.290 --> 49:24.220 that you're all describing defensive protocols and methods, 49:24.220 --> 49:27.870 right, and it doesn't really matter to the Chinese, 49:27.870 --> 49:30.530 or to our foreign adversary, if they know that. 49:30.530 --> 49:31.730 They can get around our defenses 49:31.730 --> 49:33.650 and there is no consequences, 49:33.650 --> 49:37.040 so what are we actually doing to change the rationale, 49:37.040 --> 49:39.620 the calculations that they're going to actually do 49:39.620 --> 49:42.120 these types of things that ostensibly are illegal? 49:43.374 --> 49:44.700 What is our pushback? 49:46.210 --> 49:50.500 - Well, I mean obviously, the administration's Section 301, 49:50.500 --> 49:53.000 investigation a Chinese intellectual property theft, 49:53.000 --> 49:55.050 would be an example of that. 49:55.050 --> 49:57.190 I think more broadly if we think about 49:57.190 --> 49:58.920 the offensive measures we can take 49:58.920 --> 50:00.770 from an industrial-based perspective, 50:00.770 --> 50:01.603 what are we doing 50:01.603 --> 50:03.990 to promote our own industrial base capabilities, right? 50:03.990 --> 50:06.450 I think that from a DoD perspective starts with 50:06.450 --> 50:09.460 the recognition that going forward, we're gonna have to 50:09.460 --> 50:11.450 not only remain that sole developer 50:11.450 --> 50:13.480 for certain bespoke military applications 50:13.480 --> 50:15.390 but reform our acquisition process using 50:15.390 --> 50:16.770 a way we can leverage 50:16.770 --> 50:19.240 the benefit our entire broader economy, 50:19.240 --> 50:22.730 right, and become a customer that is able to attract 50:22.730 --> 50:24.980 the best of both the heritage defense industrial base 50:24.980 --> 50:27.930 as well as emerging commercial technology providers. 50:31.250 --> 50:32.500 - [Mr. Gallego] Thank you, I yield back. 50:33.530 --> 50:35.090 - [Chair] Mr. Lamborn. 50:35.090 --> 50:35.923 - Thank you, Mr. Chairman. 50:35.923 --> 50:37.240 Thank you for having this important hearing. 50:37.240 --> 50:38.690 Thank you all for being here. 50:39.650 --> 50:42.380 This is an occasion where I'm gonna agree 50:42.380 --> 50:47.380 with Mr. Gallego, 100%, which is not a typical, 50:48.881 --> 50:52.020 (laughing) not a daily occurrence necessarily 50:52.020 --> 50:53.880 but something on this important issue, 50:53.880 --> 50:55.150 I wanted to point out. 50:55.150 --> 50:58.630 And I was gonna ask, and will ask, the same exact question, 50:58.630 --> 51:00.370 what are we doing offensively? 51:01.360 --> 51:05.010 You've talked a lot about some great defensive measures, 51:05.010 --> 51:08.440 and where we're buttoning up, then making airtight, 51:08.440 --> 51:12.720 the secure and vital research and technology 51:12.720 --> 51:15.670 that our defense contractors, that our government has, 51:15.670 --> 51:18.920 and I applaud you 100% for doing that 51:18.920 --> 51:22.190 but I would like to see more in the way of consequences 51:22.190 --> 51:25.230 to the Chinese when they have do this adverse behavior. 51:27.690 --> 51:29.790 I'll just make a editorial comment here, 51:29.790 --> 51:32.540 I think for too long administration's of both parties 51:32.540 --> 51:35.750 have been rather passive in light of what's going on. 51:35.750 --> 51:37.970 I wanna applaud the Trump Administration 51:37.970 --> 51:40.850 that at least in the area of trade 51:40.850 --> 51:44.630 that there is pushback going on now with talk of tariffs. 51:44.630 --> 51:46.030 I don't know how that's all gonna play out 51:46.030 --> 51:48.190 but I'm glad that that's being discussed 51:48.190 --> 51:52.390 and made a serious issue in Washington. 51:52.390 --> 51:55.530 I think that's an example of pushback that needs to happen. 51:56.470 --> 51:57.720 Let me throw out an idea. 51:58.660 --> 52:00.370 If you wanna comment on this you can. 52:00.370 --> 52:02.930 You don't have to if you don't want to. 52:02.930 --> 52:06.400 Should we have a, I think it might be interesting to have 52:06.400 --> 52:10.020 a widespread and concerted policy 52:10.870 --> 52:15.870 in our defense to put out wrong information, 52:16.110 --> 52:20.160 pretend like it's great information great technology, 52:20.160 --> 52:22.630 and they steal it then it won't work for 'em 52:22.630 --> 52:25.190 or they go down a dead-end and they waste money 52:25.190 --> 52:27.790 or actually backfires somehow. 52:30.170 --> 52:32.470 I think that would be an interesting thing to pursue 52:32.470 --> 52:35.980 where we start poisoning some of the technology 52:35.980 --> 52:39.430 that's ostensibly vital and healthy and good 52:39.430 --> 52:43.590 but it messes them up when they start to pursue it, 52:43.590 --> 52:44.680 any thoughts on that? 52:46.220 --> 52:47.950 - Maybe I could answer the first part of the question, 52:47.950 --> 52:49.540 and then defer to my colleagues around 52:49.540 --> 52:51.510 that particular issue specifically, 52:51.510 --> 52:55.100 but just elaborate so the Section 301 investigation 52:55.100 --> 52:58.860 of the USTR-led into Chinese theft 52:58.860 --> 53:00.440 of US intellectual property 53:00.440 --> 53:02.970 does have some offensive measures to it, 53:02.970 --> 53:06.790 and was publicly articulated in a memo 53:06.790 --> 53:09.320 from the White House on the 29th of May. 53:09.320 --> 53:10.820 There's obviously the tariff action 53:10.820 --> 53:12.730 that's been associated with that. 53:12.730 --> 53:14.510 There's potential for investment restrictions 53:14.510 --> 53:17.160 into the US economy, and then there was a WTO case 53:17.160 --> 53:21.060 that we've taken forward specifically to dispute 53:21.060 --> 53:22.500 of the Chinese-- - Okay, good. 53:22.500 --> 53:24.270 Just to be clear, there are offensive measures 53:24.270 --> 53:25.980 that are being done 53:25.980 --> 53:28.930 in response to Chinese economic aggression. 53:28.930 --> 53:30.040 I'll defer. - Thank you. 53:30.040 --> 53:31.113 - About the second question-- - I'm glad to hear that, 53:31.113 --> 53:35.710 I'm glad to hear that. 53:35.710 --> 53:37.280 - And Mr. Lamborn, I would love to follow up with you 53:37.280 --> 53:39.860 in classified session to talk more holistically 53:39.860 --> 53:41.680 at the classified level about all the different things 53:41.680 --> 53:44.420 that we are doing or looking to do. 53:44.420 --> 53:47.110 - Okay, okay, good, 53:47.110 --> 53:48.840 and lastly, I'll finish up. 53:48.840 --> 53:51.300 There was an article in The Wall Street Journal 53:51.300 --> 53:55.850 today or yesterday about some detected Chinese hacking 53:55.850 --> 53:58.260 on our space operations, 53:58.260 --> 54:00.450 and it was on not research and development 54:00.450 --> 54:02.010 but on the operations side, 54:02.010 --> 54:07.010 which indicates that there's an intent in the future perhaps 54:07.270 --> 54:10.960 to use that information to be disruptive, 54:10.960 --> 54:15.800 to disrupt operations in an offensive way, 54:15.800 --> 54:20.290 possibly in a time of conflict, does that concern you?` 54:22.400 --> 54:25.650 - Sir, that's a topic that I really 54:25.650 --> 54:28.270 do not wanna discuss in a public setting. 54:28.270 --> 54:31.600 Broadly speaking, your comment, taken on its face, 54:31.600 --> 54:33.000 is very concerning. 54:33.850 --> 54:35.820 It's, for me, very concerning 54:35.820 --> 54:37.740 to have read about it in the papers, 54:40.530 --> 54:43.839 as my colleague Kari Bingen just said, 54:43.839 --> 54:46.780 I'd welcome the opportunity to discuss this stuff 54:46.780 --> 54:48.310 in a more closed setting. 54:50.240 --> 54:51.860 - Thank you, well, with that Mr. Chairman, 54:51.860 --> 54:53.180 I'll yield back the balance of my time. 54:53.180 --> 54:54.468 Thank you for being here. 54:54.468 --> 54:55.380 - Ms. Davis. 54:56.500 --> 54:57.980 - Thank you, Mr. Chairman. 54:57.980 --> 54:59.430 Thank you all for being here. 55:00.270 --> 55:04.490 While we've raised the issue of trade policies, 55:04.490 --> 55:07.980 I wonder if you could comment and I'm not trying to make 55:07.980 --> 55:10.930 this into a 55:13.467 --> 55:15.359 a debate here in terms of trade, 55:15.359 --> 55:18.580 but we mentioned a number of areas, 55:18.580 --> 55:20.660 particularly and related to China, 55:20.660 --> 55:24.880 so was it a real missed opportunity 55:24.880 --> 55:28.690 to have not moved forward on the Trans-Pacific Partnership 55:28.690 --> 55:30.440 when it comes to national security? 55:35.110 --> 55:38.160 - I am unable to offer you an opinion on that ma'am. 55:38.160 --> 55:39.870 I'm sorry, I'm not familiar. 55:40.980 --> 55:42.840 I just don't have the expertise to comment 55:42.840 --> 55:46.200 on Trans-Pacific Partnership versus national security. 55:47.540 --> 55:50.840 - Okay, because in many ways, maybe you'd like to comment, 55:51.750 --> 55:54.680 I think we lost that opportunity 55:54.680 --> 55:58.340 to have China be more disruptive when it comes to that. 55:58.340 --> 55:59.940 Go ahead, did you wanna comment? 56:03.880 --> 56:05.950 - I agree with them the undersecretary. 56:05.950 --> 56:08.810 It's not an issue we've looked at it specifically yet, 56:08.810 --> 56:11.320 so I don't have any further comments. 56:11.320 --> 56:13.700 - Really, okay, maybe that's one of the problems. 56:13.700 --> 56:18.700 I mean I think that we were aware that national security 56:19.180 --> 56:22.360 was an issue in this regard, 56:22.360 --> 56:25.050 and it's I guess sort of surprising to me 56:25.050 --> 56:27.290 that there wasn't that kind of way in 56:27.290 --> 56:29.060 when it came to those issues, 56:29.060 --> 56:32.770 so I wanted to ask you further. 56:32.770 --> 56:34.730 And we talk about a whole-of-government approach, 56:34.730 --> 56:38.840 we're often doing that and yet when it comes to the concerns 56:38.840 --> 56:40.430 that you're raising here, 56:40.430 --> 56:43.230 how important is it and are you monitoring that? 56:44.679 --> 56:49.679 Are we engaging those elements of governance and government 56:50.130 --> 56:53.890 that, historically or traditionally, we don't think of 56:53.890 --> 56:58.127 in this area of intellectual property or endeavors, 57:00.410 --> 57:02.060 where do you think that is? 57:02.060 --> 57:05.250 I mean how did the Department of State, Treasury, Justice, 57:05.250 --> 57:08.720 Homeland Security contribute to technology protections, 57:08.720 --> 57:10.950 and are there other roles 57:10.950 --> 57:14.510 that the Department of Education, Health, and Human Services 57:14.510 --> 57:16.110 could be playing in this regard. 57:17.581 --> 57:19.060 I mean it's a complex issue, 57:19.060 --> 57:21.770 and I'm just looking to see to what extent 57:21.770 --> 57:24.050 do you think that that's important? 57:24.050 --> 57:25.400 - Well, I'll start. 57:25.400 --> 57:26.810 I do think it's important. 57:27.990 --> 57:30.690 I have said publicly actually, I believe, 57:30.690 --> 57:35.630 in an earlier hearing before this committee that... 57:39.545 --> 57:44.190 We somehow in the years since the Berlin Wall came down 57:44.190 --> 57:46.210 and the Soviet Union dissolved, 57:47.300 --> 57:51.740 we believed that great power competition was behind us. 57:53.070 --> 57:56.770 The National Defense Strategy released this past January 57:57.680 --> 58:02.680 makes a very clear set of points that we are, 58:04.030 --> 58:07.120 have returned to an era of great power competition, 58:08.250 --> 58:09.700 and we must treat it as such. 58:11.830 --> 58:16.660 When we believed throughout several decades of the Cold War 58:16.660 --> 58:20.080 when we believed we were in a great power competition 58:20.080 --> 58:25.070 for not only the hearts and minds of the world 58:25.070 --> 58:28.080 but possibly our very existence, 58:28.080 --> 58:31.350 we treated such all the matters that you're talking about, 58:31.350 --> 58:34.340 state, education, commerce, treasury, 58:34.340 --> 58:36.660 we treated all of that as if it were 58:36.660 --> 58:39.210 of existential importance, which it was; 58:40.210 --> 58:44.880 today we treat these matters 58:44.880 --> 58:47.090 as if they were individual matters. 58:47.090 --> 58:49.780 And I think what you're hearing from us is 58:49.780 --> 58:51.920 that they are not isolated issues, 58:51.920 --> 58:54.830 that they need to be treated in the large. 58:54.830 --> 58:58.430 As I was starting to answer to Mr. Gallego question earlier, 58:59.320 --> 59:01.120 we as a nation have choices. 59:01.120 --> 59:04.140 Do we wish to admit, as we have today, 59:04.140 --> 59:09.140 30,000 Chinese PhD students in STEM areas? 59:09.390 --> 59:10.900 Do we wish to do that? 59:10.900 --> 59:13.730 Do we think the benefits outweigh the gains? 59:13.730 --> 59:17.570 There is not a national decision in that regard as there was 59:17.570 --> 59:19.900 when we were competing against the Soviet Union. 59:19.900 --> 59:21.820 We didn't do those things. 59:21.820 --> 59:24.690 It's not for me to say whether we should or should not, 59:25.630 --> 59:27.520 I'm trying to put on the table 59:27.520 --> 59:30.650 that these apparently isolated decisions, 59:30.650 --> 59:33.080 in fact when taken together comprise 59:33.080 --> 59:36.050 a whole-of-government strategy that we do not have. 59:37.020 --> 59:39.420 - Yeah, I don't know if anyone wants to comment. 59:41.460 --> 59:45.130 Is there one particular example that you think 59:45.130 --> 59:47.760 creates best practices in this 59:47.760 --> 59:51.180 in a more non-traditional way of working together 59:51.180 --> 59:54.940 that we ought to be looking at more seriously? 59:59.300 --> 01:00:00.740 - Yes, go, thank you. 01:00:00.740 --> 01:00:01.870 Thank you. 01:00:01.870 --> 01:00:03.270 - I'd be happy to follow up ma'am. 01:00:04.860 --> 01:00:05.960 - [Chair] Dr. Abraham. 01:00:08.130 --> 01:00:09.590 - Thank you, Mr. Chairman. 01:00:09.590 --> 01:00:12.020 A huge problem, national security issue, 01:00:12.020 --> 01:00:16.830 and the mentality of why build it when you can steal it, 01:00:16.830 --> 01:00:20.230 so we get that, and I was listening to Ms. Bingen, 01:00:20.230 --> 01:00:24.340 you had your four pillars, and one of those was a program 01:00:24.340 --> 01:00:28.080 called Delivery Uncompromised, I think was what it says, 01:00:28.080 --> 01:00:33.020 and my question is for these contractors and subcontractors, 01:00:34.290 --> 01:00:39.240 is there an MBO and a management by objective policy 01:00:39.240 --> 01:00:41.330 that if they don't meet objectives, 01:00:41.330 --> 01:00:43.660 they're penalized or punished 01:00:43.660 --> 01:00:46.560 or if they don't reach that security level, 01:00:46.560 --> 01:00:47.890 they're kicked out of the system, 01:00:47.890 --> 01:00:52.050 is there any accountability today? 01:00:55.660 --> 01:00:57.190 - So you've actually hit on the challenge 01:00:57.190 --> 01:00:59.440 in why we are taking this different approach, 01:01:00.380 --> 01:01:02.340 when a contract is awarded to a company, 01:01:02.340 --> 01:01:04.870 it's based on cost, schedule, performance, 01:01:04.870 --> 01:01:07.060 it is not based on security. 01:01:07.060 --> 01:01:09.460 And so, part of this Delivery Uncompromised initiative 01:01:09.460 --> 01:01:12.160 is working through all the details 01:01:12.160 --> 01:01:14.710 of what would that look like, what are the standards, 01:01:14.710 --> 01:01:16.670 is there an independent verifier that does 01:01:16.670 --> 01:01:19.200 the Good Housekeeping Seal of Approval on it, 01:01:19.200 --> 01:01:21.130 how do we work with our acquisition colleagues 01:01:21.130 --> 01:01:24.200 on infusing security into acquisition policies 01:01:24.200 --> 01:01:27.300 into the regulations into the actual and the COTRs, 01:01:27.300 --> 01:01:30.400 the contracting officials, that help drive those decisions, 01:01:30.400 --> 01:01:33.290 so those are all the details that we're working through now. 01:01:33.290 --> 01:01:36.010 But then also, industry can't look at it 01:01:36.010 --> 01:01:38.470 the way they do today, which is this is a cost center, 01:01:38.470 --> 01:01:40.100 and it's a loss to my bottom line. 01:01:40.100 --> 01:01:43.120 They have to be incentivized to look at security 01:01:43.120 --> 01:01:46.060 as this is actually gonna help me make more, more profit. 01:01:46.060 --> 01:01:48.770 - [Dr. Abraham] But are they held to that standard now? 01:01:48.770 --> 01:01:49.750 - They are not. - Okay, 01:01:49.750 --> 01:01:53.240 and I'll just go to a quick second question. 01:01:54.950 --> 01:01:56.900 Classified versus unclassified, 01:01:56.900 --> 01:02:00.450 we understand that today's classified data 01:02:00.450 --> 01:02:04.133 is yesterday's outdated data or vice-versa, 01:02:04.133 --> 01:02:06.910 that this data evolves so quickly 01:02:06.910 --> 01:02:09.350 and this technology evolve so quickly 01:02:09.350 --> 01:02:11.540 that it is hard to keep up with, 01:02:11.540 --> 01:02:16.540 and that if you take two unclassified pieces of data, 01:02:16.820 --> 01:02:18.900 and perhaps marry them together, 01:02:18.900 --> 01:02:21.600 then it becomes a classified document. 01:02:22.440 --> 01:02:24.980 My question just for my understanding, 01:02:25.900 --> 01:02:29.130 who actually has the authority to make the call 01:02:30.020 --> 01:02:33.020 as to whether a piece of data a piece of technology 01:02:34.300 --> 01:02:36.330 is classified or is unclassified? 01:02:36.330 --> 01:02:37.870 Is this the project managers? 01:02:37.870 --> 01:02:39.150 Is it somebody in DoD? 01:02:39.150 --> 01:02:40.290 Is it somebody? 01:02:40.290 --> 01:02:44.900 What wheelhouse makes that decision on a daily basis? 01:02:48.720 --> 01:02:49.820 - Undersecretary for intelligence 01:02:49.820 --> 01:02:52.090 has the policy responsibilities, 01:02:52.090 --> 01:02:54.260 so we set the framework and the basic standards 01:02:54.260 --> 01:02:56.100 for what those different thresholds are. 01:02:56.100 --> 01:02:58.551 - Responsibility, then you have the authority 01:02:58.551 --> 01:03:01.660 but do others under you also have the authority? 01:03:01.660 --> 01:03:04.400 I understand the responsibility and that's where, 01:03:04.400 --> 01:03:06.810 the bullet does stop there, but the authority 01:03:06.810 --> 01:03:10.550 can be delegated out to other people, 01:03:10.550 --> 01:03:13.080 is that a lot of fingers going out 01:03:13.080 --> 01:03:14.410 or is it two or three people? 01:03:14.410 --> 01:03:15.360 How does that work? 01:03:16.360 --> 01:03:19.160 - Well in the technology arena, for example, 01:03:19.160 --> 01:03:21.200 I have original classification authority 01:03:21.200 --> 01:03:25.190 should I make a determination that a particular set 01:03:25.190 --> 01:03:27.770 of technologies upon which we're working 01:03:27.770 --> 01:03:32.240 needs to be protected and many others do as well, 01:03:33.270 --> 01:03:35.010 those authorities can be delegated 01:03:35.010 --> 01:03:37.020 and are delegated downward. 01:03:40.050 --> 01:03:42.180 I know there have been breaches. 01:03:42.180 --> 01:03:45.280 We had reference to that earlier on today 01:03:45.280 --> 01:03:47.550 of actual classified information, 01:03:48.600 --> 01:03:52.560 but I will go on record, sir, as saying that, 01:03:54.730 --> 01:03:58.050 I believe this hearing and our witness statements 01:03:58.050 --> 01:04:00.910 and responses to questions are more about 01:04:00.910 --> 01:04:05.260 the amalgamated effect of the industrial base 01:04:05.260 --> 01:04:07.920 and technology levels as a whole 01:04:07.920 --> 01:04:12.920 not whether or not a particular exfiltration attempt 01:04:13.000 --> 01:04:17.050 by the Chinese was successful in a particular case, 01:04:17.050 --> 01:04:20.330 but rather the whole pattern of Chinese investment 01:04:20.330 --> 01:04:23.770 in our industrial base, extraction of data, 01:04:23.770 --> 01:04:28.770 predatory joint ventures, predatory trade practices, 01:04:29.404 --> 01:04:33.690 the whole spectrum of Chinese adversarial behavior 01:04:33.690 --> 01:04:36.880 with respect to our economic and industrial base. 01:04:36.880 --> 01:04:39.890 I believe that's actually the larger concern, sir. 01:04:39.890 --> 01:04:43.210 - Oh, I understand the 30,000-foot view, 01:04:43.210 --> 01:04:46.140 but I also understand the ground-level view 01:04:46.140 --> 01:04:48.270 that if we have that one breach 01:04:48.270 --> 01:04:50.330 on a national security issue, 01:04:50.330 --> 01:04:54.070 it can certainly parlay into something much bigger. 01:04:54.070 --> 01:04:55.160 - [Michael] Absolutely, sir. 01:04:55.160 --> 01:04:56.810 - I yield back Mr. Chairman, thank you. 01:04:58.450 --> 01:04:59.283 - Mr. Larsen. 01:05:00.430 --> 01:05:02.940 - Thank you, Mr. Chairman. 01:05:04.750 --> 01:05:07.930 On the debate about whole government approach, 01:05:07.930 --> 01:05:10.450 I'm just concerned that you throw that term around 01:05:10.450 --> 01:05:12.990 like it's candy at a parade 01:05:12.990 --> 01:05:17.610 because at the same time you've testified that someone, 01:05:17.610 --> 01:05:19.810 one of you did, that Belt Road initiative 01:05:19.810 --> 01:05:24.620 is problematic for US policy, at the same time, 01:05:24.620 --> 01:05:27.130 you testify that our Department of Commerce 01:05:27.130 --> 01:05:29.600 is holding bimonthly meetings with US companies, 01:05:29.600 --> 01:05:32.040 in the US Embassy in China to figure out ways 01:05:32.040 --> 01:05:35.410 for those US companies to access projects, 01:05:35.410 --> 01:05:36.810 in the Belt Road initiative, 01:05:37.900 --> 01:05:40.750 at the same time you talked about whole government approach, 01:05:40.750 --> 01:05:43.910 I'm not asking you to be experts on trade or TPP, 01:05:43.910 --> 01:05:47.240 but to have some concept of what the argument was 01:05:47.240 --> 01:05:49.110 on trade trans partnership 01:05:49.110 --> 01:05:53.360 and how it fit into leveraging US economic policy 01:05:53.360 --> 01:05:56.650 and strength in Asia vis-a-vis China 01:05:58.300 --> 01:06:03.300 just that basic understanding would be helpful for you all. 01:06:04.720 --> 01:06:06.890 And so, I don't think you're talking about 01:06:06.890 --> 01:06:07.723 a whole-of-government approach, 01:06:07.723 --> 01:06:10.030 I think you're talking about, you may be talking about 01:06:10.030 --> 01:06:11.420 a whole-Pentagon approach. 01:06:15.050 --> 01:06:17.140 If there's a whole government approach, 01:06:17.140 --> 01:06:18.580 I would like to know it, not from you today, 01:06:18.580 --> 01:06:20.280 but just another example 01:06:20.280 --> 01:06:22.350 if we're an era of great power competition, 01:06:22.350 --> 01:06:24.100 you talk about the last one we had, 01:06:25.217 --> 01:06:27.520 and we're not doing those things today 01:06:27.520 --> 01:06:29.010 that we did in the last one. 01:06:29.010 --> 01:06:32.190 Well, in the last one we had we fought for open markets. 01:06:32.190 --> 01:06:33.904 We put human rights near the top of the list 01:06:33.904 --> 01:06:35.830 when we talked to North Korea, 01:06:37.400 --> 01:06:39.773 and we're not doing that today, 01:06:39.773 --> 01:06:43.280 does that not apply to this era of great power competition? 01:06:43.280 --> 01:06:45.940 So again I think you're throwing the term around 01:06:45.940 --> 01:06:48.050 to try to make it sound like you're doing it 01:06:48.050 --> 01:06:50.700 but I don't think you are, and you need to get on it. 01:06:51.630 --> 01:06:54.790 You need to have a mechanism, 01:06:56.190 --> 01:06:59.910 if we only had a National Security Council mechanism 01:06:59.910 --> 01:07:02.281 that could develop a whole government approach 01:07:02.281 --> 01:07:05.510 that's used by the White House, then we might have one. 01:07:09.480 --> 01:07:10.480 I usually don't give speeches. 01:07:10.480 --> 01:07:13.180 I usually ask questions in my five minutes, 01:07:13.180 --> 01:07:16.350 but it's just been frustrating 01:07:16.350 --> 01:07:18.930 to hear this term being thrown around again, 01:07:18.930 --> 01:07:22.210 like candy had it at a 4th of July parade, 01:07:22.210 --> 01:07:26.400 and I don't think you're living up to it. 01:07:26.400 --> 01:07:28.790 Ms. Bingen, I wanted to ask you about 01:07:29.749 --> 01:07:31.099 a couple questions on your, 01:07:32.450 --> 01:07:35.780 you made for four points on what you're doing. 01:07:35.780 --> 01:07:38.660 Specifically on, I think it was your third or second point 01:07:38.660 --> 01:07:41.800 about Section 806 and 1696 authorities 01:07:41.800 --> 01:07:43.380 and strengthening of supply chain security 01:07:43.380 --> 01:07:47.380 in the Defense Department, that's great, 01:07:47.380 --> 01:07:49.180 that might favor larger contractors. 01:07:50.730 --> 01:07:54.320 Because they have the capacity to absorb the costs, 01:07:54.320 --> 01:07:56.660 if you will, how are you gonna ensure 01:07:56.660 --> 01:08:00.620 that smaller companies, smaller businesses, 01:08:00.620 --> 01:08:04.240 that maybe have more innovative ideas 01:08:04.240 --> 01:08:07.170 can bring more flexibility to the table, the Pentagon? 01:08:07.170 --> 01:08:10.720 How're you gonna ensure that they don't get tossed aside 01:08:10.720 --> 01:08:12.084 because they don't have that capacity 01:08:12.084 --> 01:08:15.970 to do the kinds of things, perhaps on supply chain security, 01:08:15.970 --> 01:08:17.720 that you might be asked them to do? 01:08:19.280 --> 01:08:20.630 - Mr. Larsen, that's a great question, 01:08:20.630 --> 01:08:22.390 and that's something that we'll have to work through. 01:08:22.390 --> 01:08:24.170 We're really just at the front end of that. 01:08:24.170 --> 01:08:27.750 And on 1696, we're putting together 01:08:27.750 --> 01:08:30.350 the plan for it right now, 01:08:30.350 --> 01:08:33.170 I think the pilot has to be established by next, 01:08:33.170 --> 01:08:36.240 I think early next year, 2019, so that is something 01:08:36.240 --> 01:08:38.210 that we absolutely will have to consider. 01:08:39.676 --> 01:08:41.910 I don't know that I have a good answer for you today, 01:08:41.910 --> 01:08:43.770 but it's something that we are looking into, 01:08:43.770 --> 01:08:45.230 and I'd be happy to follow up with you. 01:08:45.230 --> 01:08:46.670 - Yeah, if you could. 01:08:46.670 --> 01:08:50.550 You were staffing on the committee when we did a tour around 01:08:50.550 --> 01:08:54.930 the country with small businesses and Chairman Shuster, 01:08:54.930 --> 01:08:58.050 at the time, and I went around the country, 01:08:58.050 --> 01:09:00.860 and tried to find ways we could bring small business 01:09:00.860 --> 01:09:02.980 more into Pentagon contracting, 01:09:02.980 --> 01:09:05.070 so just would ask you to watch that, 01:09:05.070 --> 01:09:06.950 - And then we'll also have to work with them 01:09:06.950 --> 01:09:08.950 as we do the Delivering Uncompromised pieces. 01:09:08.950 --> 01:09:10.700 They don't, you're right, they don't have the capacity 01:09:10.700 --> 01:09:12.040 that a lot of these large folks do, 01:09:12.040 --> 01:09:14.790 so it's how do we incentivize them, 01:09:14.790 --> 01:09:16.980 and also how do we work the liability issues 01:09:16.980 --> 01:09:18.840 to encourage them to report, 01:09:18.840 --> 01:09:20.520 and to make these fixes when they just don't have 01:09:20.520 --> 01:09:22.390 that big capital that the large folks do. 01:09:22.390 --> 01:09:24.570 - Yeah, and then again it for me, 01:09:25.727 --> 01:09:28.010 the crux of it is that these, 01:09:28.010 --> 01:09:29.790 this is where some of the innovation 01:09:29.790 --> 01:09:34.330 that we need to have happen, and 01:09:34.330 --> 01:09:37.950 Mr. Griffin wants to have happen. 01:09:37.950 --> 01:09:41.110 A lot of this is gonna take place in smaller companies 01:09:41.110 --> 01:09:43.370 but we don't need to be building hurdles 01:09:43.370 --> 01:09:44.830 to make it more difficult for them to do that, 01:09:44.830 --> 01:09:48.190 so I just would ask you guys to watch that. 01:09:48.190 --> 01:09:49.440 Thank you and yield back. 01:09:51.020 --> 01:09:51.853 - Mr. Kelly. 01:09:56.783 --> 01:09:58.190 - Thank you, Mr. Chairman. 01:09:58.190 --> 01:09:59.670 This is great hearing to have. 01:09:59.670 --> 01:10:01.920 I think sometimes we overlook 01:10:03.869 --> 01:10:06.310 the issue of technology transfer, 01:10:06.310 --> 01:10:08.480 and just to follow up on what was said 01:10:08.480 --> 01:10:10.190 about the need to go on offense: 01:10:11.250 --> 01:10:12.780 As we're considering a few initiatives, 01:10:12.780 --> 01:10:15.450 obviously the need to strengthen CFIUS 01:10:15.450 --> 01:10:16.970 but I would also like to call your attention 01:10:16.970 --> 01:10:19.870 to Section 217 of the Senate NDAA, 01:10:19.870 --> 01:10:24.450 which provides the USD(R&E) with the authority 01:10:24.450 --> 01:10:27.230 to establish or fund a non-profit entity 01:10:27.230 --> 01:10:29.920 to help facilitate research and technology development 01:10:29.920 --> 01:10:32.750 in critical hardware-based technologies 01:10:32.750 --> 01:10:34.090 that the private sector has tended 01:10:34.090 --> 01:10:36.110 to insufficiently support 01:10:36.110 --> 01:10:38.310 and could help meet emerging security needs, 01:10:38.310 --> 01:10:41.150 and I know it's a long bill but have you all, 01:10:41.150 --> 01:10:43.300 maybe starting with Mr. Griffin, 01:10:43.300 --> 01:10:45.550 been able to take a look at this provision, 01:10:45.550 --> 01:10:47.850 and from your initial read, do you support it? 01:10:49.400 --> 01:10:52.970 - Yes, sir, I have read that section. 01:10:52.970 --> 01:10:54.870 I've worked with some of the folks 01:10:54.870 --> 01:10:59.240 that are promulgating that initiative, 01:10:59.240 --> 01:11:00.620 and I support it. 01:11:00.620 --> 01:11:02.650 - And Mr. Chewning, I know we've had discussions on this, 01:11:02.650 --> 01:11:04.710 I'd just be interesting your thoughts on that angle 01:11:04.710 --> 01:11:07.320 of the need to invest in hardware. 01:11:07.320 --> 01:11:09.330 We spend so much time talking about software 01:11:09.330 --> 01:11:10.430 and not the hardware. 01:11:10.430 --> 01:11:13.600 - Yes, sir, it's a great point, and to build on it. 01:11:13.600 --> 01:11:17.120 About 92% of our venture capital investment is in software, 01:11:17.120 --> 01:11:20.140 and as we think about our need for modernization roadmaps, 01:11:20.140 --> 01:11:22.030 we know hardware and company formation, 01:11:22.030 --> 01:11:24.500 in particular hardware technology, is gonna be critical, 01:11:24.500 --> 01:11:26.470 and so I think taking that language 01:11:26.470 --> 01:11:28.720 in addition to exercising the authorities given 01:11:28.720 --> 01:11:32.460 to us by Congress in Section 1711 in last year's NDAA, 01:11:32.460 --> 01:11:34.230 we can pull together a response. 01:11:34.230 --> 01:11:36.150 - Great, I appreciate that, I couldn't agree more. 01:11:36.150 --> 01:11:39.110 I look forward to helping this provision get over the line. 01:11:40.260 --> 01:11:42.440 I think one of the biggest challenge you face with that, 01:11:42.440 --> 01:11:43.940 those of us in the room here today 01:11:43.940 --> 01:11:45.430 may understand the scope of the challenge 01:11:45.430 --> 01:11:47.660 but much of the broader society doesn't, 01:11:47.660 --> 01:11:50.300 and in fact, I think our competitive edge, in many cases, 01:11:50.300 --> 01:11:51.830 hinges on more people just getting it 01:11:51.830 --> 01:11:53.870 from the promising researcher 01:11:53.870 --> 01:11:56.250 who takes a second look at an attractive offer 01:11:56.250 --> 01:11:59.660 to join a state-connected Chinese firm or a graduate student 01:11:59.660 --> 01:12:02.700 who decides maybe they shouldn't conduct PhD STEM research 01:12:02.700 --> 01:12:06.250 in China, and I know this hearing's about solutions for DoD 01:12:06.250 --> 01:12:08.290 but I'd be fascinated to hear your thoughts 01:12:08.290 --> 01:12:10.260 on how we can better communicate 01:12:10.260 --> 01:12:14.280 the story we're hearing today to the broader population. 01:12:14.280 --> 01:12:18.790 In reading sort of the DIUx report on technology transfer, 01:12:18.790 --> 01:12:21.570 one of the key proposals is outreach 01:12:21.570 --> 01:12:23.080 to the private sector and academia, 01:12:23.080 --> 01:12:25.940 and so, just maybe a question, 01:12:25.940 --> 01:12:28.612 let's just go down the panel that way, 01:12:28.612 --> 01:12:31.260 how can we more effectively conduct that outreach 01:12:31.260 --> 01:12:32.510 to the private sector, to academia, 01:12:32.510 --> 01:12:34.883 and to society more broadly? 01:12:34.883 --> 01:12:38.200 I know it's a big question. 01:12:38.200 --> 01:12:41.320 - It's a great question. I think increasingly 01:12:41.320 --> 01:12:43.250 through our industry association engagement, 01:12:43.250 --> 01:12:46.300 and not just with the types of folks 01:12:46.300 --> 01:12:48.880 you think we'd be talking to but more broadly, 01:12:48.880 --> 01:12:50.590 increasingly we're hearing those concerns 01:12:50.590 --> 01:12:51.810 from the industry associations, 01:12:51.810 --> 01:12:54.690 and I think it's the need to begin to separate 01:12:54.690 --> 01:12:58.310 the need for an incremental revenue opportunity 01:12:58.310 --> 01:13:00.060 where you may be going into a new market 01:13:00.060 --> 01:13:02.380 to the longer lens necessary 01:13:02.380 --> 01:13:05.210 recognizing that you're gonna be doing business with someone 01:13:05.210 --> 01:13:08.230 who eventually wants to put you out of business, 01:13:08.230 --> 01:13:09.920 and the need to get that message across. 01:13:09.920 --> 01:13:12.330 - Yeah, it can't just put a maybe a finer point on it. 01:13:12.330 --> 01:13:13.890 I mean, we've had these recent stories 01:13:13.890 --> 01:13:17.310 about certain Silicon Valley companies not wanting 01:13:17.310 --> 01:13:19.460 to do business with DoD 01:13:19.460 --> 01:13:23.590 because of an intersecting with lethal drone operations, 01:13:23.590 --> 01:13:26.180 right, I mean that this huge problem if at the time 01:13:26.180 --> 01:13:28.730 when we need to be working more closely 01:13:28.730 --> 01:13:30.760 with the Googles, with the Amazons, with the Facebooks 01:13:30.760 --> 01:13:35.070 of the world, that's sort of the cultural reaction 01:13:35.070 --> 01:13:36.140 to working with DoD, I'm just wondering 01:13:36.140 --> 01:13:38.310 if you could just comment on that briefly, 01:13:38.310 --> 01:13:40.840 and how do we turn that conversation around? 01:13:40.840 --> 01:13:43.420 If that makes any sense. 01:13:43.420 --> 01:13:44.320 - Absolutely, sir. 01:13:45.660 --> 01:13:47.010 We're disappointed in that, 01:13:48.200 --> 01:13:51.610 but we also know, particularly in artificial intelligence, 01:13:51.610 --> 01:13:53.810 that's where the talent, that's where the technology is. 01:13:53.810 --> 01:13:55.460 The government is not leading in this area, 01:13:55.460 --> 01:13:57.220 so we need to be able to leverage that. 01:13:57.220 --> 01:13:58.470 They look at, when I think about 01:13:58.470 --> 01:14:01.210 the numbers of transactions, the datasets that they have, 01:14:01.210 --> 01:14:03.590 some of our problems may be pretty straightforward for them 01:14:03.590 --> 01:14:05.010 given what they do in the commercial sector 01:14:05.010 --> 01:14:07.420 and we've got to be able to leverage that. 01:14:07.420 --> 01:14:10.050 So for us from intelligence perspective, 01:14:10.050 --> 01:14:12.110 we have a clear mission imperative, 01:14:12.110 --> 01:14:14.740 we have manual labor intensive processes 01:14:14.740 --> 01:14:17.690 that our analysts undertake every day, 01:14:17.690 --> 01:14:19.220 we've got to make it better for them 01:14:19.220 --> 01:14:21.570 and use their brainpower more effectively. 01:14:21.570 --> 01:14:24.710 But department-wide there are a lot of other challenges 01:14:24.710 --> 01:14:28.470 that we have, logistics, business reforms, et cetera, 01:14:28.470 --> 01:14:29.900 that would benefit from them, 01:14:29.900 --> 01:14:32.140 and we've got to believe that there are folks there 01:14:32.140 --> 01:14:33.830 that bleed red, white, and blue, 01:14:33.830 --> 01:14:36.280 and wanna participate in hard national security prob, 01:14:36.280 --> 01:14:38.030 well, want to participate and support national security 01:14:38.030 --> 01:14:40.030 but also that the engineers like our problems, 01:14:40.030 --> 01:14:41.560 and we've got good ones for them to work on. 01:14:41.560 --> 01:14:43.400 - [Mr. Kelly] Sure, well I've run out of time. 01:14:43.400 --> 01:14:45.800 I have a bunch of other questions that we won't get to, 01:14:45.800 --> 01:14:47.150 but thank you for what you're doing. 01:14:47.150 --> 01:14:48.090 This is an important subject, 01:14:48.090 --> 01:14:50.580 and I yield the balance of my time to Chair. 01:14:50.580 --> 01:14:52.040 - Mr. Langevin. 01:14:52.040 --> 01:14:52.890 - Thank you, Mr. Chairman. 01:14:52.890 --> 01:14:56.390 I wanna thank our witnesses for your testimony here today, 01:14:56.390 --> 01:14:57.400 like many of my colleagues, 01:14:57.400 --> 01:15:00.232 I believe comprehensive whole government approaches 01:15:00.232 --> 01:15:03.980 is really needed to maintain US technological superiority 01:15:03.980 --> 01:15:06.240 as you've heard from many of my colleagues. 01:15:07.300 --> 01:15:11.240 The problem we went into is that is that 01:15:11.240 --> 01:15:14.590 the less democratic states have no trouble marshaling 01:15:14.590 --> 01:15:17.820 their collective resources to their advantage, 01:15:17.820 --> 01:15:21.060 so what are your recommendations to congress for policies 01:15:21.060 --> 01:15:24.064 that maintain our technological edge in critical areas 01:15:24.064 --> 01:15:27.380 by countering activities of other nations 01:15:27.380 --> 01:15:30.060 while also fostering a culture of innovation 01:15:30.060 --> 01:15:31.110 in the United States? 01:15:34.780 --> 01:15:37.420 - Well, I'm fond of saying that 01:15:37.420 --> 01:15:40.610 the best way to get ahead and stay ahead 01:15:40.610 --> 01:15:45.230 is to work harder, run faster. 01:15:45.230 --> 01:15:50.230 We believe that our free market capitalist system, 01:15:51.040 --> 01:15:52.520 capitalist-based system 01:15:52.520 --> 01:15:57.520 is the seed of innovation 01:15:57.580 --> 01:15:58.860 to a far greater extent 01:15:58.860 --> 01:16:01.760 than any command economy can achieve, 01:16:01.760 --> 01:16:04.410 and indeed the entire topic of this hearing 01:16:04.410 --> 01:16:07.110 is about China stealing from us 01:16:07.110 --> 01:16:08.760 not about us stealing from China, 01:16:09.800 --> 01:16:14.800 so if we can provide the kinds of incentives 01:16:15.171 --> 01:16:18.450 that my colleagues have been talking about. 01:16:18.450 --> 01:16:20.350 We just mentioned 217 01:16:20.350 --> 01:16:25.350 for new authorities for hardware-based venture companies. 01:16:27.250 --> 01:16:28.570 If we, in the DoD, 01:16:30.570 --> 01:16:32.870 using the authorities that you've given us, 01:16:32.870 --> 01:16:36.060 learn to deal with our industrial base 01:16:36.060 --> 01:16:39.340 on or commercial basis, 01:16:39.340 --> 01:16:41.820 on a quicker and more responsive manner 01:16:41.820 --> 01:16:44.980 that is not so burdensome to our companies. 01:16:44.980 --> 01:16:47.860 I think those actions will help us stay ahead. 01:16:49.350 --> 01:16:52.980 The mere recognition that we are in a competition, 01:16:52.980 --> 01:16:55.820 and that we should not be making it easier 01:16:55.820 --> 01:16:59.500 for our adversary will help us. 01:17:01.160 --> 01:17:03.440 My colleague, Kari Bingen outlined 01:17:03.440 --> 01:17:04.940 and our statement outlines, 01:17:04.940 --> 01:17:07.820 four broad areas that we are very serious about. 01:17:10.830 --> 01:17:12.550 So other than those more general statements, 01:17:12.550 --> 01:17:15.860 I don't know that I have any very specific things 01:17:15.860 --> 01:17:18.040 to recommend to you. 01:17:19.480 --> 01:17:20.440 - [Mr. Kelly] Thank you, Ms. Bingen. 01:17:20.440 --> 01:17:21.940 Do you have anything to offer? 01:17:24.800 --> 01:17:25.840 - [Kari] I think I would just echo 01:17:25.840 --> 01:17:27.540 what Dr. Griffin just highlighted. 01:17:30.080 --> 01:17:32.460 - Okay, let me-- - My job, sir. 01:17:32.460 --> 01:17:35.230 Yeah, I look at my job as slowing the Chinese 01:17:35.230 --> 01:17:36.950 and others down from getting our stuff. 01:17:36.950 --> 01:17:39.030 His job is to push the envelope 01:17:39.030 --> 01:17:42.180 on our own technology investment, and our own R and D, 01:17:42.180 --> 01:17:44.110 and my fear right now or my big concern 01:17:44.110 --> 01:17:47.280 is what's being taken from us now. 01:17:47.280 --> 01:17:49.190 The R and D that we're both and that S and T 01:17:49.190 --> 01:17:50.213 that we're both competing for, 01:17:50.213 --> 01:17:52.480 we're both interested in the same things right now. 01:17:52.480 --> 01:17:53.500 That is what's gonna show up 01:17:53.500 --> 01:17:55.620 on the battlefield five to 10 years from now, 01:17:55.620 --> 01:17:59.590 and that's what, we need to slow down our adversaries, 01:17:59.590 --> 01:18:01.390 and then speed up our own capabilities. 01:18:01.390 --> 01:18:02.990 - Let me amplify my comment, sir, 01:18:02.990 --> 01:18:05.010 with just one short, short statement: 01:18:05.010 --> 01:18:09.150 One of the best assets we have is in fact 01:18:09.150 --> 01:18:10.810 the openness of our society, 01:18:10.810 --> 01:18:15.810 and our alliances and partnerships with our Western allies, 01:18:15.910 --> 01:18:19.990 the more that we can find ways to do things jointly 01:18:19.990 --> 01:18:23.375 with them and binding them to us, 01:18:23.375 --> 01:18:26.230 that is a positive step we can take, sir. 01:18:26.230 --> 01:18:27.200 Thank you. 01:18:27.200 --> 01:18:28.790 - Thank you, so let me ask you this: 01:18:28.790 --> 01:18:31.610 There are many promising ideas that the department 01:18:31.610 --> 01:18:33.560 has invested intellectual equity, 01:18:33.560 --> 01:18:35.920 and only see those ideas and programs end up 01:18:35.920 --> 01:18:38.886 in the valley of death, so recognizing 01:18:38.886 --> 01:18:43.410 the remain utility, other entities certainly could swoop in 01:18:43.410 --> 01:18:46.680 and swoop up any gains made at that point 01:18:46.680 --> 01:18:48.240 and move forward from there, 01:18:48.240 --> 01:18:51.280 so I find this troubling, I'm sure you do as well, 01:18:51.280 --> 01:18:54.390 you know the programs like hypersonics and directed energy, 01:18:54.390 --> 01:18:58.640 where we invested but our competitors have taken our ideas 01:18:58.640 --> 01:19:01.140 and our investments and continued to innovate, 01:19:01.140 --> 01:19:04.790 so do you deem it a risk when we've worked on and developed 01:19:04.790 --> 01:19:08.320 a technology but failed to fund the transition? 01:19:10.650 --> 01:19:12.360 Also, are there policy impediments 01:19:12.360 --> 01:19:16.460 that slow technology transfer to our to our own forces? 01:19:17.670 --> 01:19:20.640 - Well, sir, the National Defense Strategy 01:19:20.640 --> 01:19:25.550 released in January frankly makes a big deal 01:19:25.550 --> 01:19:27.190 out of the point you have just raised, 01:19:27.190 --> 01:19:31.300 and has specific force modernization goals 01:19:31.300 --> 01:19:34.520 for the future fight that are outlined in that strategy, 01:19:34.520 --> 01:19:39.090 and we are working today, this week, this month, 01:19:40.500 --> 01:19:44.460 next month to enshrine these and to to codify these 01:19:44.460 --> 01:19:47.540 in the upcoming budget preparation. 01:19:49.840 --> 01:19:53.150 We have done groundwork, important groundwork 01:19:53.150 --> 01:19:56.830 in directed energy, especially in hypersonics especially, 01:19:56.830 --> 01:20:01.730 that we have, if you will, let lie for a while 01:20:01.730 --> 01:20:05.520 when we should have been turning it into actual force. 01:20:06.600 --> 01:20:08.570 We're trying to reverse that trend. 01:20:08.570 --> 01:20:11.970 We are working with all deliberate speed to do that. 01:20:11.970 --> 01:20:13.420 The two areas that you mentioned, 01:20:13.420 --> 01:20:15.150 hypersonics and directed energy, 01:20:15.150 --> 01:20:18.410 are major candidates for re-vectoring. 01:20:18.410 --> 01:20:21.230 I'm working on that as we speak. 01:20:21.230 --> 01:20:22.600 - Thank you, well, the sooner, the better. 01:20:22.600 --> 01:20:24.430 I know my time is expired. - Yes, sir, thank you. 01:20:24.430 --> 01:20:25.263 - I'll yield back. 01:20:25.263 --> 01:20:26.600 Thank you for you testimony. 01:20:26.600 --> 01:20:28.080 - Mr. Hice. 01:20:28.080 --> 01:20:29.990 - [Mr. Hice] Thank you, Mr. Chairman. 01:20:29.990 --> 01:20:33.340 Dr. Griffin in the written testimony earlier 01:20:33.340 --> 01:20:35.520 it was discussed and brought up, 01:20:35.520 --> 01:20:38.180 the need to better balance risk with speed 01:20:38.180 --> 01:20:40.340 when it comes to prototyping, 01:20:40.340 --> 01:20:42.130 can you expound on that a little bit, 01:20:42.130 --> 01:20:43.930 and explain why that's so important? 01:20:45.320 --> 01:20:48.430 - My favorite topic, sir. (chuckles) 01:20:48.430 --> 01:20:50.776 That's because in my more useful years, 01:20:50.776 --> 01:20:52.580 I did that for a living. 01:20:55.690 --> 01:20:58.550 I now hope to enable others to do it for a living. 01:20:59.480 --> 01:21:01.400 I think the key point that I would make 01:21:01.400 --> 01:21:06.400 is that if we can return to what used to be 01:21:07.380 --> 01:21:09.640 this country's ace-in-the-hole, 01:21:09.640 --> 01:21:12.580 our ability to try out new ideas, 01:21:12.580 --> 01:21:15.580 cobble them together in prototype fashion, 01:21:15.580 --> 01:21:17.900 take them to the test range, fly them off, 01:21:17.900 --> 01:21:21.050 see how they work, fix 'em where they break, 01:21:21.050 --> 01:21:24.000 and plump 'em up where they're doing good, 01:21:25.280 --> 01:21:29.480 then let operators interact with them 01:21:29.480 --> 01:21:32.330 because designers and operators need to work together. 01:21:33.872 --> 01:21:38.872 When we can develop new things in that fashion 01:21:39.210 --> 01:21:40.900 that is the best of this country. 01:21:42.670 --> 01:21:45.810 We have let our processes get in our way, 01:21:45.810 --> 01:21:50.030 and by that I mean our legal and contracting processes. 01:21:50.030 --> 01:21:53.200 The congress has bent over backwards 01:21:53.200 --> 01:21:57.370 to offer broader permissions by which we might undertake 01:21:57.370 --> 01:22:00.410 these developments, and if I have a single mission in life 01:22:00.410 --> 01:22:03.070 as the new undersecretary in this area, 01:22:03.070 --> 01:22:05.480 it is to get our guys in the field, 01:22:05.480 --> 01:22:08.070 working again on these new ideas, 01:22:08.070 --> 01:22:10.980 and let nature tell us which ones are good. 01:22:10.980 --> 01:22:13.530 The key point is, it's important to recognize that 01:22:13.530 --> 01:22:15.790 a test failure is not a failure, 01:22:15.790 --> 01:22:18.490 the failure is when we don't stick to the goal 01:22:18.490 --> 01:22:20.780 and get the product to the finish line. 01:22:20.780 --> 01:22:22.570 - Very good, well I'm glad to hear that, 01:22:22.570 --> 01:22:26.010 and secondly I'd like to kind of follow up 01:22:26.010 --> 01:22:28.770 on where Dr. Abraham was going a little bit earlier, 01:22:28.770 --> 01:22:32.260 and I'm not sure exactly who this would be addressed to, 01:22:32.260 --> 01:22:34.280 so maybe even a couple of you have an answer, 01:22:34.280 --> 01:22:39.050 but how do we incentivize companies to comply 01:22:39.050 --> 01:22:41.400 with the Deliver Uncompromised? 01:22:44.730 --> 01:22:47.260 - Sir, that's something we're working through right now. 01:22:47.260 --> 01:22:49.100 We've had actually an FFRDC come onboard 01:22:49.100 --> 01:22:50.270 and do a study for us, 01:22:50.270 --> 01:22:52.250 and we're working through those recommendations, 01:22:52.250 --> 01:22:55.490 but some of this is gonna be outside our area too. 01:22:56.690 --> 01:22:59.590 It comes back to, how do they look at this 01:22:59.590 --> 01:23:02.020 so it's not a cost but it's a profit for them. 01:23:03.320 --> 01:23:07.320 How do we encourage them to self-report, 01:23:09.340 --> 01:23:11.200 but not think that there's gonna be a liability 01:23:11.200 --> 01:23:12.810 or a penalty associated with that, 01:23:12.810 --> 01:23:16.880 so are there tax incentives we can pursue, 01:23:16.880 --> 01:23:20.380 regulatory incentives, safe harbor idea, 01:23:20.380 --> 01:23:22.710 so we're working through all of those right now. 01:23:22.710 --> 01:23:24.750 But we do think that there are some concrete ideas 01:23:24.750 --> 01:23:27.950 that we can explore to do those incentives. 01:23:27.950 --> 01:23:32.860 - And I think that's extremely important to solidify this, 01:23:32.860 --> 01:23:34.287 would you agree? 01:23:34.287 --> 01:23:36.590 - Absolutely, sir, and the sooner, the better. 01:23:36.590 --> 01:23:38.120 - Anyone else have a comment? 01:23:38.120 --> 01:23:40.960 - Yes, sir, I mean, we need through combination 01:23:40.960 --> 01:23:45.180 of public policy, tax code, selection criteria 01:23:45.180 --> 01:23:50.180 for our procurements, we need to make it in the interests 01:23:50.650 --> 01:23:52.870 of our industrial base to protect 01:23:52.870 --> 01:23:56.870 their own intellectual property from theft 01:23:59.270 --> 01:24:01.320 when it is in their interest to do so, 01:24:01.320 --> 01:24:05.540 when it is a profit center rather than a cost center, 01:24:05.540 --> 01:24:07.720 when they care about it as much as we do 01:24:07.720 --> 01:24:09.410 then that will turn around. 01:24:10.290 --> 01:24:12.960 - Okay, while you're going on that, 01:24:12.960 --> 01:24:15.820 how well integrated is the executive branch 01:24:15.820 --> 01:24:17.580 on the whole threat here? 01:24:20.280 --> 01:24:22.630 - That might be above all of our pay grades 01:24:22.630 --> 01:24:23.590 put together, sir. 01:24:23.590 --> 01:24:25.430 - But y'all, you're dealing with this. 01:24:25.430 --> 01:24:27.300 Just from your observation. 01:24:28.530 --> 01:24:33.530 - Well, it depends upon it depends upon 01:24:33.600 --> 01:24:35.160 who you talk to really. 01:24:36.640 --> 01:24:41.040 The primary interest of the commerce department 01:24:41.040 --> 01:24:43.060 is to promote commerce. 01:24:44.590 --> 01:24:47.710 The primary interests of the intelligence community, 01:24:47.710 --> 01:24:48.880 I won't speak to that. 01:24:48.880 --> 01:24:51.070 We have intelligence community representatives, 01:24:51.070 --> 01:24:53.770 but as Kari has said a couple times, 01:24:53.770 --> 01:24:55.920 their goal is to protect what we have. 01:24:57.460 --> 01:24:59.306 Those two imperatives-- 01:24:59.306 --> 01:25:02.030 - Is DoD and the intelligence community 01:25:02.030 --> 01:25:05.030 cooperating at least? 01:25:05.030 --> 01:25:06.130 - I think we are, sir. 01:25:07.280 --> 01:25:09.390 - Daily, weekly, monthly basis. 01:25:09.390 --> 01:25:11.340 - Okay. - I go to all those meetings. 01:25:12.670 --> 01:25:15.950 - All right, thank you, Mr. Chairman, I yield back. 01:25:15.950 --> 01:25:16.783 - Mrs. Hartzler. 01:25:19.120 --> 01:25:20.060 - Thank you very much. 01:25:20.060 --> 01:25:23.260 Thanks for being here on this very, very important topic. 01:25:23.260 --> 01:25:25.780 There was a recent article in Foreign Policy magazine 01:25:25.780 --> 01:25:27.880 that discussed how China has created 01:25:27.880 --> 01:25:30.910 a sophisticated state surveillance system 01:25:30.910 --> 01:25:33.320 with facial recognition technology 01:25:33.320 --> 01:25:35.340 specifically to target minorities, 01:25:35.340 --> 01:25:38.150 and what they call anti-china behavior, 01:25:38.150 --> 01:25:39.560 and they developed this system with the help 01:25:39.560 --> 01:25:42.520 of Chinese surveillance firms, like Hikvision. 01:25:42.520 --> 01:25:46.130 Now Hikvision is about 42% owned by the Chinese government, 01:25:46.130 --> 01:25:49.070 and the chairman of Hikvision's board was quoted as saying 01:25:49.070 --> 01:25:50.790 that the board must ensure the company, 01:25:50.790 --> 01:25:53.610 quote, creates a state-owned enterprise, 01:25:53.610 --> 01:25:56.710 and that it remains, quote, under direct control 01:25:56.710 --> 01:25:59.040 of the Communist Party Central Committee. 01:25:59.040 --> 01:26:03.720 In fact, Hikvision received $3 billion line of credit 01:26:03.720 --> 01:26:05.690 from the state-owned China Development Bank, 01:26:05.690 --> 01:26:08.640 and this is one of the three so-called policy banks 01:26:08.640 --> 01:26:11.870 whose financing objectives follow political motives, 01:26:11.870 --> 01:26:14.090 and I'm sure you can imagine that I was alarmed 01:26:14.090 --> 01:26:16.340 when I learned that Hikvision cameras were operated 01:26:16.340 --> 01:26:19.210 at a military installation in my district. 01:26:19.210 --> 01:26:21.170 The cameras have since been removed, 01:26:21.170 --> 01:26:23.480 but I am disturbed that the federal government 01:26:23.480 --> 01:26:26.750 willingly purchased these cameras knowing that China 01:26:26.750 --> 01:26:30.130 is actively engaged in espionage against the United States, 01:26:31.600 --> 01:26:33.670 so my question is I'm deeply concerned 01:26:33.670 --> 01:26:35.590 that video surveillance and security equipment 01:26:35.590 --> 01:26:38.690 sold by Chinese companies exposes the US government 01:26:38.690 --> 01:26:42.930 to significant vulnerabilities due to potential back in, 01:26:42.930 --> 01:26:44.900 I mean, built-in back doors creating 01:26:44.900 --> 01:26:49.320 a video surveillance network for China purchased by 01:26:49.320 --> 01:26:53.570 the taxpayer and installed courtesy of the US government. 01:26:53.570 --> 01:26:55.340 I would like each of you to discuss 01:26:55.340 --> 01:26:56.830 the security vulnerabilities 01:26:56.830 --> 01:26:59.680 posed by Chinese surveillance cameras, 01:26:59.680 --> 01:27:02.520 and whether or not you believe it's a security risk 01:27:02.520 --> 01:27:06.340 to have them operating at US government facilities. 01:27:06.340 --> 01:27:10.220 So Mr. Schinella, you want to start? 01:27:11.170 --> 01:27:14.750 - Sure, that's everything you've laid out there 01:27:14.750 --> 01:27:16.680 is consistent with some of the threats 01:27:16.680 --> 01:27:18.370 which we tried to point the flashlight out 01:27:18.370 --> 01:27:19.820 in our opening statement. 01:27:19.820 --> 01:27:21.710 You've got essentially a state-owned 01:27:21.710 --> 01:27:25.040 or certainly state-invested company, 01:27:26.410 --> 01:27:30.310 and you've got an example of the sort of, 01:27:32.730 --> 01:27:36.320 you could characterize it as an insider threat, if you will, 01:27:36.320 --> 01:27:39.050 but the Chinese government's relationships 01:27:39.050 --> 01:27:40.200 with these kinds of companies, 01:27:40.200 --> 01:27:42.350 which have a worldwide commercial presence, 01:27:43.990 --> 01:27:47.450 poses as actors or a threat you've identified, 01:27:47.450 --> 01:27:50.960 and as my colleague articulated, it's also an indication 01:27:50.960 --> 01:27:52.700 of the different kind of world we had. 01:27:52.700 --> 01:27:54.770 We weren't buying surveillance cameras 01:27:54.770 --> 01:27:57.590 from the Soviet Union in those days 01:27:57.590 --> 01:27:59.750 but when you've got Chinese companies 01:27:59.750 --> 01:28:02.550 making world-class equipment on a global market. 01:28:02.550 --> 01:28:04.050 They pose a threat that is different 01:28:04.050 --> 01:28:06.150 than we face during the Cold War. 01:28:06.150 --> 01:28:09.840 - And ma'am if I might, it's obviously a concern, 01:28:09.840 --> 01:28:12.450 and something that we're actively working. 01:28:12.450 --> 01:28:15.170 There're other additional examples like that, 01:28:15.170 --> 01:28:16.640 that we'd happy to take you through 01:28:16.640 --> 01:28:19.880 in a classified setting to discuss similar vulnerabilities 01:28:19.880 --> 01:28:20.800 that we've identified, 01:28:20.800 --> 01:28:22.740 and then what we're doing to remediate them. 01:28:22.740 --> 01:28:24.050 - That'd be great. 01:28:25.120 --> 01:28:27.360 - And Mrs. Hartzler, if I can also just add, 01:28:27.360 --> 01:28:29.260 going back to the supply chain discussion we had 01:28:29.260 --> 01:28:31.060 and the policies associated with that 01:28:31.060 --> 01:28:33.980 and the congressional engagement in the direction 01:28:33.980 --> 01:28:35.980 that you all provided us. 01:28:35.980 --> 01:28:38.110 There are three areas of the supply chain I worry about. 01:28:38.110 --> 01:28:40.480 It's going through the front door, the cyber exfiltration, 01:28:40.480 --> 01:28:42.760 and us making it easy for them. 01:28:42.760 --> 01:28:44.440 It's too, exactly what you highlighted. 01:28:44.440 --> 01:28:45.850 It's the backdoor piece, 01:28:45.850 --> 01:28:48.360 but then third there's also the counterfeit part piece, 01:28:48.360 --> 01:28:50.940 and we need to be able to look holistically at all of those 01:28:50.940 --> 01:28:53.130 and mitigate threats along all three of those vectors, 01:28:53.130 --> 01:28:55.140 which the authorization you provided us 01:28:55.140 --> 01:28:56.370 helps us to start doing. 01:28:57.450 --> 01:29:00.710 - Mr. Griffin, you have anything to add? 01:29:00.710 --> 01:29:03.740 - Shockingly, for me, I have nothing useful to add. 01:29:03.740 --> 01:29:04.573 Thank you ma'am. 01:29:04.573 --> 01:29:06.210 - You bet. 01:29:06.210 --> 01:29:07.930 Mr. Schinella and also Mr. Griffin, 01:29:07.930 --> 01:29:11.810 you mentioned in your comments concerns about universities 01:29:11.810 --> 01:29:14.570 and the Chinese using the universities. 01:29:14.570 --> 01:29:17.690 That's something I'm very concerned as well, 01:29:17.690 --> 01:29:19.320 the National Intelligence Council, 01:29:19.320 --> 01:29:22.520 you provided us with this chart that shows 01:29:22.520 --> 01:29:25.950 the different programs that China has in talent recruitment 01:29:25.950 --> 01:29:29.810 and of the snapshot that is provided here, 01:29:29.810 --> 01:29:33.370 approximately 2/3 of these individuals worked or studied 01:29:33.370 --> 01:29:37.010 in the US and are employed in China 01:29:37.010 --> 01:29:42.010 in areas such as defense, research, technology, 01:29:42.100 --> 01:29:44.580 state-owned enterprises academia, and things. 01:29:44.580 --> 01:29:45.650 Mr. Griffin, you said, 01:29:45.650 --> 01:29:47.580 it's not to me to give a recommendation, 01:29:47.580 --> 01:29:48.880 so I'll ask Mr. Schinella. 01:29:49.910 --> 01:29:52.570 Do you think we should change our visa system 01:29:52.570 --> 01:29:55.580 to deny Chinese students 01:29:55.580 --> 01:29:58.170 being able to participate in PhD programs? 01:30:00.910 --> 01:30:03.230 - Well, as part of the US intelligence community, 01:30:03.230 --> 01:30:07.190 it's even less my mandate to make policy recommendations, 01:30:07.190 --> 01:30:10.860 but as the intelligence product you have illustrates 01:30:10.860 --> 01:30:14.000 and as my opening remarks indicated, 01:30:15.640 --> 01:30:20.640 China through a state-directed policy absolutely is trying 01:30:20.740 --> 01:30:25.740 to make the most licit and illicit, 01:30:25.900 --> 01:30:28.620 but often through absolutely legal mechanisms, 01:30:29.560 --> 01:30:33.630 exploitation of their ability to take advantage 01:30:33.630 --> 01:30:35.680 of the US university system. 01:30:35.680 --> 01:30:37.900 - [Mrs. Hartzler] Thank you, time. 01:30:37.900 --> 01:30:38.900 - [Chair] Mr. Bacon. 01:30:39.760 --> 01:30:42.390 - Thank you very much, we appreciate your all's time today. 01:30:42.390 --> 01:30:44.920 What I'd ask you a question about some of the areas 01:30:44.920 --> 01:30:47.390 that we're seeing bigger advances with technology, 01:30:47.390 --> 01:30:50.180 of course, we keep seeing advances at stealth. 01:30:50.180 --> 01:30:53.880 We're seeing higher capacity computing power, 01:30:53.880 --> 01:30:56.680 which is changing a lot of our weapon systems, 01:30:56.680 --> 01:31:00.330 hypersonics, robotic-type investments, 01:31:00.330 --> 01:31:01.950 and also nanotechnology, 01:31:01.950 --> 01:31:03.080 so a few of these, I just wanna ask a question. 01:31:03.080 --> 01:31:06.410 How did we fall behind in your mind in the hypersonics side, 01:31:06.410 --> 01:31:07.810 'cause that's what I keep reading? 01:31:07.810 --> 01:31:10.260 What can we learn from that? 01:31:10.260 --> 01:31:11.760 And I just open up to anybody. 01:31:13.170 --> 01:31:14.920 - Well, let me take that one first. 01:31:16.330 --> 01:31:21.190 We fell behind because while this nation 01:31:21.190 --> 01:31:26.190 was pioneering in that era, we decided some years back 01:31:26.860 --> 01:31:31.860 that we did not face a significant threat requiring 01:31:31.990 --> 01:31:34.770 the delivery of force by means of hypersonic weapons. 01:31:35.960 --> 01:31:40.030 So we, as an earlier questioner asked, 01:31:40.030 --> 01:31:41.890 we didn't transition those. 01:31:41.890 --> 01:31:43.500 - Right. - We could have. 01:31:43.500 --> 01:31:48.070 we just chose not to our adversary, China, 01:31:48.070 --> 01:31:51.910 has gone on to develop a very, very startling capability 01:31:51.910 --> 01:31:53.420 in that area. 01:31:53.420 --> 01:31:56.340 We certainly can match and exceed that capability, 01:31:56.340 --> 01:31:58.660 and we are setting about that task. 01:32:00.790 --> 01:32:02.350 But we fell behind 01:32:02.350 --> 01:32:04.860 because we elected to make other choices, sir. 01:32:04.860 --> 01:32:07.110 - I was primarily focused on the Middle East. 01:32:07.110 --> 01:32:08.690 I would assume Afghanistan, Iraq, 01:32:08.690 --> 01:32:11.290 probably preoccupied our band-- 01:32:11.290 --> 01:32:14.110 - There is always the tyranny of the urgent 01:32:14.110 --> 01:32:19.110 versus the long-term, and truly I lived through all of this 01:32:21.020 --> 01:32:23.440 Cold War competition and such. 01:32:24.840 --> 01:32:27.150 At one of my political adversaries 01:32:27.150 --> 01:32:30.170 once labeled me as an unreconstructed cold warrior, 01:32:30.170 --> 01:32:33.760 it was not offered as a compliment but I took it as such, 01:32:34.610 --> 01:32:38.060 so we have for 25 years believed that the era 01:32:38.060 --> 01:32:41.360 of great power competition was over, and it's not. 01:32:41.360 --> 01:32:44.350 - Let me ask you, I've been reading about robotic technology 01:32:44.350 --> 01:32:46.350 and that Russia is investing a lot into that, 01:32:46.350 --> 01:32:47.700 would you say that we're... 01:32:49.070 --> 01:32:50.530 Where we at with that compared to the Russians? 01:32:50.530 --> 01:32:52.140 If you can elaborate. 01:32:52.140 --> 01:32:53.560 If anybody wants to. 01:32:54.860 --> 01:32:58.190 - I don't believe that I know I can give you 01:32:58.190 --> 01:33:00.670 an assessment for the record later sir. 01:33:00.670 --> 01:33:04.660 I will say that in the area of autonomy machine learning, 01:33:04.660 --> 01:33:09.360 robotics generally, that as as my colleague said earlier, 01:33:09.360 --> 01:33:12.550 and quite quite well deserves emphasis, 01:33:12.550 --> 01:33:15.280 the DoD is a small player, 01:33:15.280 --> 01:33:18.290 with regard to where commercial industry is. 01:33:18.290 --> 01:33:19.850 Now, that's not bad. 01:33:19.850 --> 01:33:23.649 Our commercial industrial base is the biggest single asset 01:33:23.649 --> 01:33:26.330 that we have for national security, 01:33:29.210 --> 01:33:33.760 but we need to make it attractive for them 01:33:33.760 --> 01:33:35.200 to continue work in this area, 01:33:35.200 --> 01:33:36.490 and we need to make it attractive 01:33:36.490 --> 01:33:37.860 for them to partner with us, 01:33:37.860 --> 01:33:39.760 so that we can reap those advantages. 01:33:40.630 --> 01:33:41.970 - One last question in this line, 01:33:41.970 --> 01:33:44.030 and I'll give somebody else a chance to answer any of these 01:33:44.030 --> 01:33:47.240 but nanotechnology, I keep reading the importance 01:33:47.240 --> 01:33:49.490 that, maybe 23 years about, what miniaturization 01:33:49.490 --> 01:33:51.870 will be able to do to the battlefield, 01:33:51.870 --> 01:33:54.170 can you talk about that at all, because it fascinates me 01:33:54.170 --> 01:33:55.910 that we'll be able, maybe have weapons systems 01:33:55.910 --> 01:33:58.870 that are quite a bit smaller and harder to detect, 01:33:59.910 --> 01:34:02.370 and perhaps just as lethal as what we have today. 01:34:06.370 --> 01:34:07.203 Yeah. 01:34:10.140 --> 01:34:12.510 - I think the the innovations you're describing 01:34:12.510 --> 01:34:14.360 are exciting in a lot of fronts, 01:34:14.360 --> 01:34:17.140 because of the warfighting applicability they have. 01:34:17.140 --> 01:34:18.840 I also think it draws on an important distinction 01:34:18.840 --> 01:34:21.270 that we've talked a lot about the type of innovation 01:34:21.270 --> 01:34:24.020 that we're expecting industry to push to us, 01:34:24.020 --> 01:34:25.961 there's also pull effect, 01:34:25.961 --> 01:34:28.850 and the innovation of our warfighters to take technologies, 01:34:28.850 --> 01:34:31.120 like you're describing, experiment with them 01:34:31.120 --> 01:34:34.210 so we can determine how they will impact // going forward, 01:34:34.210 --> 01:34:36.330 and then providing that feedback to industry, 01:34:36.330 --> 01:34:38.230 and so I think this push-pull concept around 01:34:38.230 --> 01:34:42.200 how we // this innovation, we take commercial insight, 01:34:42.200 --> 01:34:44.650 figure out what the military applicability are, 01:34:44.650 --> 01:34:46.590 is an important part of the equation. 01:34:46.590 --> 01:34:49.340 - Anybody else wanna jump in on any of those questions? 01:34:50.790 --> 01:34:52.620 - Mr. Bacon, I'll go outside my line a bit. 01:34:52.620 --> 01:34:54.910 No, (laughs) that's probably dangerous. 01:34:56.250 --> 01:35:00.337 I do want to bring this back to China a bit as well, 01:35:00.337 --> 01:35:03.720 and when I look at some of the trends out there, 01:35:03.720 --> 01:35:05.680 and frankly it's less about us protecting ours 01:35:05.680 --> 01:35:08.120 but this is really us making it a national priority 01:35:08.120 --> 01:35:09.640 in some of these technology areas. 01:35:09.640 --> 01:35:11.740 They've got 16 mega-projects. 01:35:11.740 --> 01:35:14.060 These are Manhattan-style projects. 01:35:16.493 --> 01:35:18.440 Global share of R and D expenditures: 01:35:18.440 --> 01:35:23.440 The US dropped 11% between 2000/2015, 01:35:23.580 --> 01:35:25.750 China increased 21%. 01:35:25.750 --> 01:35:30.150 STEM degrees, is 2014 data, but Chinese universities 01:35:30.150 --> 01:35:34.250 are putting out 1.3 million students with STEM backgrounds. 01:35:34.250 --> 01:35:38.350 We are 525,000, so just what I think of those numbers, 01:35:38.350 --> 01:35:40.690 and what that portends for the future. 01:35:40.690 --> 01:35:43.330 The onus is on us, really make these challenges 01:35:43.330 --> 01:35:45.250 and these technologies a national priority. 01:35:45.250 --> 01:35:46.510 - [Mr. Bacon] Okay, well thank you so much, 01:35:46.510 --> 01:35:48.530 and Mr. chairman if we got time at the end, 01:35:48.530 --> 01:35:50.380 I'd like to, I got my one more minute question 01:35:50.380 --> 01:35:52.350 if come back around, but I yield. 01:35:53.390 --> 01:35:54.223 - Mr. Banks. 01:35:55.110 --> 01:35:56.490 - Thank you, Mr. Chairman. 01:35:56.490 --> 01:35:59.710 Dr. Griffin, I along with 25 members of congress, 01:35:59.710 --> 01:36:03.100 this week sent a bicameral and bipartisan letter 01:36:03.100 --> 01:36:06.710 to the Secretary of Education earlier this week on Tuesday 01:36:06.710 --> 01:36:10.690 that expressed our concern about Huawei's links 01:36:10.690 --> 01:36:12.450 to the Chinese government. 01:36:12.450 --> 01:36:16.540 Huawei has so-called, quote, research partnerships 01:36:16.540 --> 01:36:18.980 with over 50 US universities 01:36:18.980 --> 01:36:22.690 and is likely using these relationships to exploit the open 01:36:22.690 --> 01:36:26.260 and transparent culture of our schools and communities 01:36:26.260 --> 01:36:27.670 as well as gain access 01:36:27.670 --> 01:36:31.050 to critical next-generation technologies. 01:36:31.050 --> 01:36:34.140 We know that China has used relationships like these 01:36:34.140 --> 01:36:37.370 for spying, conducting cyberattacks, 01:36:37.370 --> 01:36:41.130 and committing industrial and economic espionage; 01:36:41.130 --> 01:36:45.250 meanwhile, the DoD policy that governs technology transfer 01:36:45.250 --> 01:36:48.130 is dated back to 1999. 01:36:48.130 --> 01:36:50.860 At that point we had no idea what an iPhone was, 01:36:50.860 --> 01:36:53.260 we were worried about Y2K, 01:36:53.260 --> 01:36:56.360 and the USB flash drive wasn't even invented. 01:36:56.360 --> 01:36:58.360 The world, as I'm sure you would acknowledge, 01:36:58.360 --> 01:37:00.310 is very different technologically now 01:37:00.310 --> 01:37:03.620 than it was 19 years ago, so Dr. Griffin considering 01:37:03.620 --> 01:37:07.480 the emerging nature of strategic competition with China, 01:37:07.480 --> 01:37:10.390 and the increasing need to protect our critical investments 01:37:10.390 --> 01:37:13.440 in both academic and private partnerships, 01:37:13.440 --> 01:37:16.940 what is the DoD doing to protect the DoD funded research 01:37:16.940 --> 01:37:19.920 from foreign threats and unvetted members 01:37:19.920 --> 01:37:21.650 with uncertain loyalties? 01:37:21.650 --> 01:37:23.400 And what specifically are you doing 01:37:23.400 --> 01:37:26.030 to assist the Secretary of Education 01:37:26.030 --> 01:37:28.770 in mitigating risk to universities and other schools 01:37:28.770 --> 01:37:31.500 and help the federal government to protect in advance 01:37:31.500 --> 01:37:34.250 the United States technological advantage? 01:37:37.020 --> 01:37:38.892 - Sir, that's a bigger question 01:37:38.892 --> 01:37:41.760 than I believe I can answer here for the record. 01:37:41.760 --> 01:37:45.680 I think Eric might be more capable than I. 01:37:45.680 --> 01:37:46.780 I share your concern. 01:37:46.780 --> 01:37:51.780 I've several times alluded in this hearing to the number, 01:37:52.540 --> 01:37:57.540 and in fact the existence of so many Chinese STEM students 01:37:57.570 --> 01:38:00.520 in the United States, I completely share your concern, 01:38:00.520 --> 01:38:01.780 and it's well documented 01:38:01.780 --> 01:38:05.310 that this is an avenue of access for the Chinese 01:38:05.310 --> 01:38:08.560 that we'd not want them to have. 01:38:08.560 --> 01:38:11.900 Beyond that, I don't have any detail for you. 01:38:11.900 --> 01:38:12.900 Eric? 01:38:12.900 --> 01:38:16.528 - [Mr. Banks] Aside, before we move to Eric, 01:38:16.528 --> 01:38:19.150 are you too concerned about the dollars 01:38:19.150 --> 01:38:23.847 that fund academic research on universities in America, 01:38:23.847 --> 01:38:26.830 that on our behalf are engaged 01:38:26.830 --> 01:38:29.070 in classified research for DoD. 01:38:30.210 --> 01:38:31.940 - I am concerned that we... 01:38:33.550 --> 01:38:35.020 - That have ties Huawei and-- 01:38:35.020 --> 01:38:39.710 - I am concerned that we are not yet as vigilant 01:38:39.710 --> 01:38:44.270 as we should be about making sure that that research 01:38:44.270 --> 01:38:46.870 doesn't go to places that have those ties. 01:38:48.580 --> 01:38:50.380 Certainly, universities have 01:38:50.380 --> 01:38:54.900 a very long multi-decade history of collaboration 01:38:54.900 --> 01:38:58.680 with the national security community at large 01:38:58.680 --> 01:39:01.100 on problems of national interest, 01:39:01.100 --> 01:39:03.130 it's one of our greatest strengths 01:39:03.130 --> 01:39:05.420 but doing so in an environment 01:39:05.420 --> 01:39:09.744 that can be penetrated by adversaries is not wise, 01:39:09.744 --> 01:39:13.120 and we are looking more closely at that, 01:39:14.000 --> 01:39:15.240 - [Mr. Banks] So Mr. Chewning, you would agree 01:39:15.240 --> 01:39:17.150 that we're not as vigilant as we should be 01:39:17.150 --> 01:39:18.590 as Dr. Griffin said. 01:39:18.590 --> 01:39:20.630 - I agree 100%. 01:39:20.630 --> 01:39:23.440 We are concerned, we are reviewing the contract language 01:39:23.440 --> 01:39:26.460 associated with those research projects at the universities, 01:39:26.460 --> 01:39:29.330 and I think more broadly this hits on the hard issue 01:39:29.330 --> 01:39:32.060 of we have an open-innovation model, 01:39:32.060 --> 01:39:34.640 and we have an adversary that's within that model, 01:39:34.640 --> 01:39:36.840 it operates a closed model on their own side, 01:39:36.840 --> 01:39:38.330 and that we need to experiment to find 01:39:38.330 --> 01:39:39.880 what the structural fix is for that 01:39:39.880 --> 01:39:42.680 without breaking what makes our system work 01:39:42.680 --> 01:39:43.580 best in the world. 01:39:43.580 --> 01:39:45.850 - Are either of you aware at all of any interest 01:39:45.850 --> 01:39:47.290 by the US Department of Education, 01:39:47.290 --> 01:39:49.930 and these ties or the subject at large? 01:39:49.930 --> 01:39:53.020 Have you had any conversations with any leaders 01:39:53.020 --> 01:39:55.190 at the Department of Education? 01:39:55.190 --> 01:39:57.570 - I have not, I would be happy to do so, 01:39:57.570 --> 01:40:00.340 but I personally have not, 01:40:00.340 --> 01:40:04.300 and of course another difference between now and 1999, 01:40:04.300 --> 01:40:06.780 which you cited, was that China had not been admitted 01:40:06.780 --> 01:40:10.110 to the World Trade Organization in 1999, 01:40:10.110 --> 01:40:14.930 and I might make the point that that was truly 01:40:14.930 --> 01:40:19.100 a seminal branch point that allows many of the types 01:40:19.100 --> 01:40:21.180 of intrusions of which you speak. 01:40:23.510 --> 01:40:25.110 - Thank you very much, I yield back. 01:40:26.980 --> 01:40:31.320 - Let me follow up with just one question for Mr. Schinella, 01:40:31.320 --> 01:40:34.030 and probably Ms. Bingen, 01:40:34.030 --> 01:40:36.810 as a practical matter for our purposes, 01:40:37.890 --> 01:40:39.550 should we see any distinction 01:40:39.550 --> 01:40:42.590 between a Chinese company and the Chinese government? 01:40:44.300 --> 01:40:49.300 So if a Chinese company is investing in some technology, 01:40:49.320 --> 01:40:52.110 some business, something going on, 01:40:52.110 --> 01:40:54.460 for our, as a practical matter for our purposes, 01:40:54.460 --> 01:40:56.130 is that, should we see that 01:40:56.130 --> 01:41:00.640 as the Chinese government doing it? 01:41:00.640 --> 01:41:01.940 - I would say there's a gradation, 01:41:01.940 --> 01:41:06.380 but whether you've got a wholly owned state-owned company 01:41:06.380 --> 01:41:10.760 that essentially is an element of the Chinese government 01:41:11.990 --> 01:41:15.830 or largely a genuinely private company 01:41:15.830 --> 01:41:18.420 that the Chinese government still has leverage over 01:41:18.420 --> 01:41:22.020 back within China, there may be a spectrum of risk, 01:41:22.020 --> 01:41:24.100 but I would say that at no point 01:41:24.100 --> 01:41:26.260 on that spectrum is the risk zero. 01:41:27.990 --> 01:41:29.750 - [Chair] Okay, Ms. Bingen, do you have anything to add? 01:41:29.750 --> 01:41:30.730 - Mr. Chairman, I just add 01:41:30.730 --> 01:41:34.170 the China National Intelligence law from 2017 says 01:41:34.170 --> 01:41:36.470 that all organizations and citizens 01:41:36.470 --> 01:41:38.090 shall support, cooperate with, 01:41:38.090 --> 01:41:40.650 and collaborate in national intelligence work. 01:41:40.650 --> 01:41:43.330 - Yeah, that's kind of what I thought. 01:41:43.330 --> 01:41:45.230 Mr. Bacon you had a quick question. 01:41:45.230 --> 01:41:46.520 - One quick follow-up, 01:41:46.520 --> 01:41:48.670 I know CFIUS has a very important role, 01:41:48.670 --> 01:41:51.480 and we we need to protect our technology 01:41:51.480 --> 01:41:54.020 and make sure it's not being sold or exported, 01:41:55.160 --> 01:41:56.800 particularly prematurely, 01:41:56.800 --> 01:41:58.680 well I have a concern I heard from a couple of companies 01:41:58.680 --> 01:42:00.250 where they thought there was some, 01:42:00.250 --> 01:42:02.030 they were unfairly limited, 01:42:02.030 --> 01:42:03.630 so when I've asked CFIUS about this they go, 01:42:03.630 --> 01:42:05.540 "Well, we're our own appeal authority," 01:42:05.540 --> 01:42:07.060 I'm wondering from the DoD perspective 01:42:07.060 --> 01:42:09.330 shouldn't we not have an appeal authority 01:42:09.330 --> 01:42:10.830 somewhere in the DoD to say... 01:42:12.338 --> 01:42:14.710 In case CFIUS gets it wrong once or twice 01:42:14.710 --> 01:42:17.010 on whatever company that they hold back. 01:42:17.010 --> 01:42:19.540 You got any thoughts on that? 01:42:19.540 --> 01:42:22.320 - Congressman if there's any specific case, of course, 01:42:22.320 --> 01:42:24.020 we're always being able to provide briefings 01:42:24.020 --> 01:42:26.780 to members explain the rationale and the logic 01:42:26.780 --> 01:42:29.210 behind why decision occurred the way it did. 01:42:29.210 --> 01:42:31.231 I will say as the representative for the department 01:42:31.231 --> 01:42:32.790 on the interagency committee, 01:42:34.110 --> 01:42:37.290 companies may not be aware of the full fact base 01:42:37.290 --> 01:42:39.860 that we have, because we conduct the RBA's 01:42:39.860 --> 01:42:41.600 as they're informed by the intelligence community, 01:42:41.600 --> 01:42:44.110 and so I could see why certain companies 01:42:44.110 --> 01:42:45.520 may not think we got it right, 01:42:45.520 --> 01:42:47.160 because they don't have the picture that we do 01:42:47.160 --> 01:42:49.923 based on the work from the intelligence community. 01:42:49.923 --> 01:42:51.670 - I got that, I think and I would say, 01:42:51.670 --> 01:42:53.720 99% of time that's probably the case, 01:42:53.720 --> 01:42:55.750 but should there not be a somebody, 01:42:55.750 --> 01:42:58.390 some kind of recourse outside of CFIUS, 01:42:59.410 --> 01:43:00.243 because it's hard 01:43:00.243 --> 01:43:02.390 because what I'm hearing is your own appeal authority, 01:43:02.390 --> 01:43:05.550 and granted you, I'm sure you get it right 99% of time. 01:43:05.550 --> 01:43:08.590 I still think from a, fairness that there's got to be 01:43:08.590 --> 01:43:12.770 some kind of board at the DoD level just to... 01:43:12.770 --> 01:43:14.490 It gives you a chance say this why we made that case, 01:43:14.490 --> 01:43:16.320 and people could agree or disagree 01:43:16.320 --> 01:43:18.340 but I think some of the companies would say, 01:43:19.350 --> 01:43:22.288 there is no other appeal authority other than CFIUS itself, 01:43:22.288 --> 01:43:23.750 seems to be there needs to be a check and balance there, 01:43:23.750 --> 01:43:25.710 and I just I throw that out as a suggestion. 01:43:25.710 --> 01:43:27.400 - No, thanks, no I'm certainly happy 01:43:27.400 --> 01:43:31.340 to take that feedback back to the committee and discuss it. 01:43:31.340 --> 01:43:32.190 - [Mr. Bacon] Thank you. 01:43:34.200 --> 01:43:36.620 - As luck would have it, votes have been called, 01:43:36.620 --> 01:43:39.110 so this worked out just right. 01:43:39.110 --> 01:43:42.260 Thank you all for being here and for your insights. 01:43:42.260 --> 01:43:43.630 We will obviously continue 01:43:43.630 --> 01:43:46.440 to have conversations on this topic. 01:43:46.440 --> 01:43:47.690 Hearing stands adjourned.