There are a myriad of proposals, touching on supply chains, restricting Chinese investment in the US and placing limits on US investment in China. But it’s the supply chain issues that appear most acute — and are drawing the most bipartisan attention at this moment in Congress.
Bottom line: This isn’t a new debate — for years, lawmakers, mostly China hawks, have pursued legislative efforts to crackdown on China. But those efforts rarely garnered much momentum. That has changed, particularly as it pertains to the thorny issue of trying to detach China’s role in the medical supply chain.
As one senior GOP aide told CNN: “Something is going to happen. Figuring out what that is, well, that’s still a work in progress.”
The emphasis first and foremost is on ensuring that the US is not dependent on China for the production of active ingredients in drugs as well as personal protective equipment. Efforts are still ad hoc, with lawmakers in agreement in principle that reliance on China leaves the US vulnerable but divided over how much government incentive to give companies to produce in the US.
“There is a range of debate on this issue, from people who emphasize US production first and foremost to people who prioritize getting stuff out of China,” the aide said
Multiple lawmakers have introduced their own bills — several of whom have made names for themselves as leading China hawks, including GOP Sens. Marco Rubio of Florida, Tom Cotton of Arkansas, Josh Hawley of Missouri and Ted Cruz of Texas. Sen. Lindsey Graham, a South Carolina Republican and close ally of the President, is planning to introduce legislation this week designed to boost manufacturing in the United States by creating domestic procurement requirements for the nation’s medical stockpile.
But there remains little agreement with the White House on what the best path forward is.
Cruz gets to the heart of what has been driving the surge of interest in these proposals: “Our vulnerability in terms of the supply chain is enormous. I think the most consequential foreign policy result of this crisis will be a fundamental reevaluation of the US’ relationship with China. … Our exposure on critical infrastructure, pharmaceuticals, PPE, the degree with which China has drawn that critical infrastructure out of the United States and into China and made us dependent on them is wholly unacceptable. We need to vigorously decouple.”
Laying the groundwork
Senate Majority Leader Mitch McConnell, in a floor speech May 7, telegraphed that the supply chain issue in particular was one that was coming into focus for Republican legislative efforts. McConnell’s floor speeches are significant markers for where the GOP may be headed — and McConnell, a Republican Kentucky, was cautious about laying out explicit next steps. It’s something that underscores the delicate balance of going after the second largest economy in the world.
But it also makes clear the groundwork is being laid for something to move on Capitol Hill.
“While we and our allies already saw the risks from letting critical supply chains to become too dependent on China, the (Communist Party of China’s) recent behavior has certainly hammered this home,” McConnell said.
“I’m confident that we here in Washington will be examining these strategic vulnerabilities,” he continued. “We’ll be looking for the best ways to strengthen our dynamic and innovative private sector, keep America on the cutting edge, and work closely with our friends who share our values and interests to build a fairer and more resilient international market.”
Options on the table
There are multiple legislative proposals out there right now, but among the discussions related to the supply chain issue are the ideas of tax breaks for companies that shift operations back the US, or even government-backed loans or direct assistance, according to congressional aides. There has not been a convergence on which route specifically to take, however.
“We need to try and incentivize companies to bring supply chains back home,” Sen. John Thune, the second-ranked Senate Republican, told CNN. “That would be kind of the carrot we need.”
When could something happen?
Two GOP aides tell CNN that Trump administration officials have been clear that they would like to see China-related measures, specifically related to the medical supply chain, included in the next coronavirus relief package.
“These are complex issues, and finding the right balance between carrots and sticks, plus the economic relationship, isn’t easy,” one aide, who is skeptical an agreement can be reached by the next stimulus package, told CNN.
For the moment, it’s clear the production of personal protective equipment is top of mind for any next steps.
“Eventually we want to move PPE production on shore as well, but I don’t have a strong sense of timing,” Sen. Rob Portman, a Republican from Ohio, told CNN.
Lawmakers interested in shoring up US production of key pharmaceuticals and PPE say their eyes are fixed on two upcoming pieces of legislation as potential vehicles for changing the US dependence on China: the National Defense Authorization Act or a potential Phase 4 stimulus bill.
“There are only so many trains that leave the station,” one GOP aide familiar with ongoing talks over supply chains told CNN.
Finding that balance
There is bipartisan support for addressing China’s role in the medical and defense supply chains. But the question of how to address it is still very much a work in progress. One of the primary reasons: China’s significant role in not just those supply chains, but the global economy. There’s also a trade deal and relationship the administration continues to be cognizant of as the debate over next steps continues.
As Portman put it: “I have heard some people say we need to pull out of the trade agreement. Well, the trade agreement is good for us. We don’t want to shoot ourselves in the foot. We do depend on them now, so we have to make sure that we have to keep our supply chains intact.”
There are enormous economic risks to driving too far, too fast on the policy front as it relates to China. One need only look at market reaction when there’s a threat to the current China trade agreement and talks for evidence as to why.
This balance is felt especially acutely by senators from agriculture-heavy states whose farmers are reliant on the first phase of the trade deal being implemented. Republicans don’t want to move too quickly or too aggressively and risk blowing up what has been a good deal for agriculture.
Take a look across the campaign messaging from vulnerable GOP senators and you see just how big of a political issue China has become.
Repeatedly, sources say, GOP consultants have advised campaigns to focus their message on cracking down on China — and campaigns have done just that, from digital and television ads to making the issue of “holding China accountable” a central messaging focus in response to the pandemic.
(Sen. Thom Tillis, a North Carolina Republican up for reelection this year, for example, is selling “China Lied: Make them Pay” bumper stickers on his campaign website. It’s $5 for two.)
This sharp focus can cut both ways. It certainly helps add fuel to the already burning momentum for lawmakers to do something related to China. But it also poses the risk of creating a scenario where both sides attempt to one up the other for political purposes, and move forward on something with damaging effects to the global economy, according to aides in both parties. Again, it’s back to finding the right balance.
“It’s not easy — if it was, we’d have done something about this years ago,” the GOP aide said. “But the will is definitely there. And it should be.”