"washington journal" live at 7:00 a.m. eastern this morning. join the discussion. this week, the c-span bus traveled to juneau, alaska as part of our 50 capitals tour. the bus continues the trip across alaska by ferry. july 21 andoin us 22nd when we will feature our visit to alaska. watch alaska weekend on c-span, c-span.org, or listen on the c-span radio app. officials testified servicese armed committee hearing on military technology and the policies for sharing such information with international and commercial partners. this is about an hour and 45

minutes.

mr. thornberry: the committee will come to order. in his january 19, 2018, remarks on the national defense strategy, secretary mattis warned that, quote, "our competitive edge has eroded in every domain of warfare -- air, land, sea, space, and cyberspace -- and it is continuing to erode," end quote. now, much of that erosion has been caused by things we've done to ourselves. sequestration and continuing resolutions come to mind. but part of the erosion in our competitive edge is the result of adversaries and competitors obtaining american technology and intellectual property by legal and often illegal means. in its january, 2018, report, "china's technology transfer strategy," diux found that the people's republic of china, for example, uses a variety of methods to obtain u.s. technology, including industrial espionage, where china is by far the most aggressive country operating in the u.s. cybertheft on a massive scale, deploying hundreds of thousands of chinese army professionals. academia, since 25% of u.s. stem graduate students are chinese foreign nationals. china's use of open source information, cataloging foreign innovation on a large scale.

chinese-based technology transfer organizations, u.s.-based associations sponsored by the chinese government to recruit talent and technical expertise on how to do deals learned from u.s. firms. that report noted that the cost of stolen intellectual property has been estimated at $300 billion a year. most alarming, diux has found, again i'll quote, "the u.s. does not have a comprehensive policy or the tools to address this massive technology transfer to china, and the u.s. government does not have a holistic view of how fast this technology transfer is occurring, the level of chinese investment in u.s. technology or what technologies we should be protecting." that's the end of the quote. now, i understand that the diux report is one report, but based on what this committee has learned and heard about over the

course of this year, those conclusions sound right to me, and it should be alarming. there are several provisions in the upcoming ndaa conference which relates to this issue, including cfius and export control regime. this hearing will better equip us to make important decisions in the days ahead. let me yield to the ranking member for any comments he'd like to make. mr. smith: thank you, mr. chairman. the most important statement is we don't have a strategy to counter what is happening. i think the chairman is right. our -- and the secretary of defense is correct. our advantage in a number of different areas has been eroding. now, the biggest reason for that, i believe, is that the rest of the world is catching up. there was a substantial period of time when it was really just the soviet union and us who were building, on a significant level, our military capacity. and we dominated the world

economically and militarily post-world war ii for a long period of time. that was never going to last forever. the rest of the world was going to develop ways to grow their economies, grow their technology, and eventually turn towards growing their defense, and that's what's happened. what has not happened on our end is we haven't responded to that. our strategy still seems to be based on the notion that we're still dominant, so we don't have to worry about these details. and i think that is dangerous and that we need to develop. i will mention a couple of key areas, most of which the chairman mentioned. but to begin with, the cfius process of protecting our technology has long needed reform. items that were not thought of as being national security are. technology, how do we protect that? how do we make that sure adversaries aren't purchasing those companies and taking away our technology? i think what the senate added to the defense bill is a great opportunity for us to update that process to help protect

our technologies through the cfius process. we have to get that right. we will try to do that in the next five, six weeks. we definitely want to be in touch, make sure the language is right, make sure what we're doing in that part is correct. the second part is the cyber p iece. we had a briefing on a cyber breach, and it was shocking how disorganized, unprepared, and, quite frankly, utterly clueless the branch of the military was that had been breached. even in this day and age we still have not figured out how to put together a cyber policy to protect our assets. in particular with our defense contractors who we work with, who store our data, but don't have adequate protection. but even within the d.o.d., we don't have a clear, cohesive policy to put in place. and the third area of policy we do not have is we don't have an

industrial policy. again, i think this is a legacy of our dominance. we didn't have industrial policy because we were dominant. an example from my own neck of the woods, boeing. why is airbus able to be subsidized and effective? well, because decades ago, we agreed to allow them, in many instances, to do that. we did that because at the time we had like 85% of the global aircraft manufacturing market. we thought, well, isn't it cute, airbus wants to compete, whatever, doesn't matter to us. well, here we are with that flipped. they stepped up and competed. now, we have not come through with a sensible idea of what technologies, what industries do we need to protect for our own national security? as the chairman will relate, i don't think it's flatware. but that seems to be the one thing that we wind up debating in the ndaa every year. while meanwhile -- no offense to those in the part of the world who consider that important -- but, you know, meanwhile, we are

losing core technologies that are critical to defense. and no one really understands exactly why. the last piece of it i'll say i think is important is trade. now, we have a somewhat -- i don't know what the word would be -- unfocused approach right now to how we combat a competitive trade environment. the one thing we definitely should be doing is figuring out how to get on a more level playing field with china. it's not just our trade deficit with china, but it is the strategies that they have put in place to capture core technologies, to steal them, in some instances, but a lot of it they're doing it within the w.t.o. framework. some of it they are doing outside of the w.t.o. framework. but we have not put together a comprehensive strategy for changing that equation, whether it is bringing trade actions against them, whether it's trying to get them to change their policies. it's sort of a reactionary approach right now.

so we need a strategy. i think this hearing is incredibly important. i look forward to the testimony of the witnesses, and i thank the chairman for convening it. i yield back. mr. thornberry: i thank the gentleman. pleased to welcome our witnesses today. honorable michael griffin, undersecretary of defense for research and engineering. honorable kari bingen, deputy undersecretary of defense for intelligence. mr. eric chewning, deputy assistant secretary of defense for manufacturing and industrial base policy. and mr. anthony schinella, national intelligence for military issues. thank you all for being here. without objection, your written statement -- looks like there's just one to me -- will be made part of the record. and we will turn it over to y'all for comments you'd like to make. mr. schinella, you're starting first? is that -- y'all figure it out. mr. secretary, go ahead if you'd like. mr. griffin: i believe the earlier agreement was that i

would start, sir. all,ank you, first of chairman thornberry, ranking member smith, members of this committee. we appear before you to discuss the very real chinese adversarial behavior to which you have refered. this is not about the threat of such behavior, this is real behavior. we are here to underscore the urgency with which all of us must focus our actions to maintain our military and technical dominance. i thank you for the trust you've placed in myself and my fellow witnesses to discuss this topic in this open setting as

carefully as we can. we did, yes, sir, we did submit a single joint statement, because we wanted to be together rather than separate. i think we have a common view of this topic. but our conversation today is only a handful of pixels in the entire picture of what we face. it's our deep belief we must act now. but at the same time, it's my duty to limit my comments to those of a strictly unclassified nature. so, as we go forward, i welcome, expect, and encourage more detailed discussions in a more restricted environment. i believe this will be necessary in the months and years ahead. this is not a problem with a short-term fix. we are here in part to recognize that this is a whole of government, indeed a whole of society, problem and recognize allies and adversaries according to the behavior of the actor. no one believes more strongly

than i in the value of international commerce and alliances and fair exchange. but the chinese theft of technology and intellectual property through the ex-filtration of the work of others is not unlike the chinese construction of islands to encourage on the international domains of international waters and those of other sovereign nations. it circumvents the autonomy of nations in a departure from a rules-based global order. it's adversarial behavior, and its perpetrator must be treated as such. the breadth and depth of chinese malfeasance with regard to not only our technology but also to our larger economy and our nation is significant and intentional.

as referenced in our written testimony, we are taking steps to counter it. you as a congress have established my office in particular to regain and maintain the technological dominance that we as a nation have depended upon in the past. we pledge to you to do that. and with your help and support, we will. thank you, and i look forward to your questions, and i yield to my colleagues. mr. schinella: mr. chairman thornberry, ranking member smith, and all of the members of the distinguished committee, good morning and thank you for welcoming me here to discuss this important topic. as d.n.i.'s national intelligence officer for military issues, i am regularly tasked with reporting on threats to the u.s. military. there are the visible threats from foreign military forces and weapon systems. but the u.s. intelligence community also sees a less visible but dual threat from adversaries and competitors that are deliberately working to acquire u.s. research, technologies, and talent to improve their own military programs and erode the effectiveness of ours. more broadly, foreign countrie'' acquisition of u.s. technology

through licit and illicit means as well as cheating on trade agreements, joint ventures, and exploiting scientific collaborations, have the potential to erode the u.s. competitive edge. foreign countries, most notably china, are able to acquire and transfer critical u.s. technologies through their intelligence services, foreign direct investments, joint ventures, open source science and technology acquisition programs, use of insiders, front companies, and scientific and business collaboration. this has potentially far-reaching consequences. as we have highlighted in the d.n.i.'s annual threat testimony, persistent trade imbalances, trade barriers, and a lack of market-friendly policies in some countries probably will continue to challenge u.s. economic security. some countries almost certainly will continue to acquire u.s. intellectual property illicitly

anddvance the own economic national security objectives. china, for example, has acquired proprietary technology and early stage ideas through cyber enabled means. some actors use legal transfers and relationships to gain access to research fields, experts, and key enabling industrial processes that could, over time, erode america's long-term competitive advantages. foreign actors know that -- recognize that investing in and acquiring technology is absolutely essential to achieve their strategic goals. they want to develop weapon systems that strike further, faster, harder, and more precisely, as a means to erode the traditional pillars of u.s. military strength and challenge the united states in all warfare domains. this pursuit of advanced weapons systems could lead to more warfare, especially in robotic

and autonomous systems operating across air, land, sea, space domains. in this capacity, the u.s. intelligence community has long monitored technology outside of their own indigenous development programs. analysis of technology transfer, most intuitively includes tracking a country's acquisition of a key technology or proponent, openly or illicitly, but also includes understanding how technical specifications, design or engineering skills, and manufacturing and production techniques. these kinds of technology transfers can allow a country to speed up or lower the cost of development projects, because they can bypass or trim the costly research and development stages. these acquisitions can not only improve foreign military capabilities but can also accrue to them economic benefits. in this, china is the embodiment of the military technology transfer challenge. the chinese government has a comprehensive strategy for technology modernization to

bolster china's international image, foster its economic growth, and improve its military modernization. and technology acquisition from the united states is definitely part of that comprehensive strategy. for some time, beijing has articulated industrial policies and long-term objectives contained in a number of comprehensive national development plans, such as its well-known five-year plans and made in china 2025 initiative. in these plans, beijing has shown that it is interested in acquiring technology and expertise that is of critical economic or national security importance to the united states. in its most recent five-year plan, beijing identified the most important priorities including clean energy, computer and information technology, aerospace and deep-sea research, and manufacturing. china's therefore prioritizing investment in and acquisition of critical future technologies that will be foundations for

future innovations, both for commercial and military innovations, like artificial intelligence, robotics, autonomous vehicles, augmented and virtual reality, financial technology, and gene editing. these technologies are inherently dual use, making it difficult to draw a line between commercial versus military applications. these technologies are likely to be foundational to future innovations and essential to the next wave of competitive high technology products. china's development strategy is multifaceted and its supporting infrastructure is robust. they acquire the skills and know-how. i'd like to highlight a few of those for you. one is joint ventures, mergers and acquisitions. tech transfer to china is occurring in part through increased levels in investment and acquisitions of u.s. companies, which hit a record

level in 2016 before dropping somewhat in 2017 and again in the first half of 2018. china's aggregate investment in u.s. technology over the past decade, from 2007 to 2017, totaled approximately $40 billion and was about $5.3 billion last year. and because the chinese communist party is intimately involved in planning economic activity and supporting companies, there is a great deal of coordinated investment, along with other vehicles of technology transfer to accomplish china's larger stated goals. another vehicle are research partnerships and academic collaborations. foreign governments often use every means at their disposal to obscure an advantage in technological areas, and the exultation of academics and researchers at u.s. colleges, national laboratories, and other institutions is one of those means. china actively seeks partnerships with government laboratories to learn about and acquire specific technology and the soft skills necessary to run such facilities.

china also uses collaborations and relationships with universities to acquire specific research and access to high-end research equipment. another vector are science and technology investments. beijing has sustained long-term state investments in its s&t infrastructure, and china leverages international collaborations with key pieces of this s&t infrastructure to gain technology and know-how. in 2017, china's spending on research and development was estimated at $279 billion, up more than 70% from 2010. another mechanism are talent recruitment programs. beijing runs multiple talent recruitment programs specifically focused on recruiting global experts who can facilitate the transfer of foreign technology, intellectual

property, and know-how to advance china's science, technology, and military modernization goals. china uses these programs, such as its thousand talents program, to recruit western-trained experts to work in china on key strategic programs. beijing also has employed western-trained returnees to implement important changes in its science, engineering, and math curricula that foster greater creativity and skills at china's top universities. another mechanism it exploits is the legal and regulatory environment. china consciously uses its laws and regulations in ways that can disadvantage u.s. companies and advantage its own companies. the chinese government uses foreign ownership restrictions such as formal and informal restrictions to require or pressure technology transfer from u.s. companies to chinese entities. the chinese government also uses

its administrative licensing and approval process to force technology transfer in exchange for the numerous administrative approvals needed to establish and operate a business in china. we also assess china will use cyberespionage and bolster its cyberattack capabilities to support national security priorities, which include technology acquisition. the i.c. and private sector experts continue to identify ongoing cyber activity from china. most detected cyber operations against the u.s. are focused on clear defense contractors or i.t. and communication firms whose products and services support government and private sector networks worldwide. and china's technology transfer mechanisms are paired with beijing's parallel strategy of military civilian fusion that expands civil military integration of defense and industrial bases to facilitate

the construction of a national infrastructure connecting the p.l.a., state-owned defense research, development and manufacturing enterprises, government agencies under the state council, universities, and firms. these have well supported beijing's rapid military modernization. what are the possible long-term consequences? well, while the most immediate and visible effects may be related to particular military technologies, the long-term consequences could be much broader. a decline of the u.s. advantage in key technology could affect our ability to set global norms and regulations for technology, control access to technology for military purposes, and reap the economic benefits we derive from commercialization. if the u.s. were to lose its technological edge, the associated loss of influence would have far-reaching implications beyond scientific disciplines to include economic,

social political, and security dynamics. within odni, we're facilitating the information exchange among the organizations responsible for the analysis of technology transfer, because this issue is global and multifunctional in reach and nature. we collaborate closely among the intelligence communities as well as other national agencies and groups and hoc groups working on specific transfer issues. we provide warning in the form of intelligence products of threats associated with technology transfer. this concludes my overview of the threats posed by military technology transfers. i will now turn to my colleagues to continue with remarks on the impact of these activities on the u.s. and on measures that will thwart and deter them. thank you very much. ms. bingen: thank you. chairman thornberry, ranking

member smith, members of the committee, it is a privilege to be back, although it is a bit of a different viewpoint from down here. i was really honored to support you and all the vital national security work you do and was fortunate to see firsthand the bipartisan approach you took to national security and providing for our military, so thank you. in my new role, i support the undersecretary of defense for intelligence as he carries out his lead responsiblites within the department on behalf of the secretary for both intelligence and security, executing the national defense strategy, including its direction to protect the national security innovation base. as you heard from my odni colleague, the department of defense is facing unprecedented threats to its technological and industrial base, putting at risk the capabilities critical to maintaining our military advantage. china, in particular, has made it a national goal to acquire foreign technologies to advance its economy and modernize its military. it is comprehensively targeting advanced u.s. technologies, and

the people, the information, businesses and research institutions that underpin them. it is playing the long game, using a variety of different methods to steal our information, circumvent our processes, and exploit our seams. across the defense intelligence and security enterprise that the usdi oversees, we are making significant changes in our approach to industrial and to information security as well as to counterintelligence. i welcome the opportunity to follow-up with you in a classified session to discuss additional initiatives we are undertaking that will provide you with a more holistic picture. in our unclassified forum today, i'll touch on four key lines of effort. first, we are elevating the private sector's focus on security through an initiative called deliver uncompromised. we must have confidence that industry is delivering capabilities, technologies, and weapon systems that are uncompromised by our adversaries, secure from cradle to grave.

it's no longer sufficient to only consider cost, schedule, and performance when acquiring defense capabilities. we must establish security as a fourth pillar in defense acquisition and also create incentives for industry to embrace security, not as a cost burden, but as a major factor in our competitiveness for u.s. business. second, through the defense security service, we're implementing a more comprehensive approach to industrial and information security. we are transitioning from a compliance, checklist-based national industrial security program to a risk-based approach informed by the threat and the department's technology protection priorities. however, safeguarding our clear defense contractors only protects part of our defense industrial base. the increasing ease of access to large amounts of unclassified and nongovernment data in the defense industrial base offers opportunities for exploitation, which, in aggregation, can be as damaging as a breach of classified information. to narrow this gap between

protecting classified information and unclassified information, we're developing a program protection plan to cover controlled unclassified information to identify the policies and resources necessary to do this. third, using authorities provided by this committee, including section 806 of the fiscal year 2011 ndaa, and section 1696 of last year's ndaa, we are strengthening the integrity of the supply chain as well as establishing a pilot program to enhance information sharing with clear defense contractors. and fourth, we are enhancing our counterintelligence capabilities to better address the nontraditional collection methods being employed by our adversaries. we are adding security and counterintelligence personnel resources to the defense security service, ncis, air force, office of special investigations, and the army c.i. our defense intelligence components are augments their collection and analysis capabilities to gain a more comprehensive understanding of threats to our technologies which will support control

-- which will improve our intelligence support to control reviews and cfius transactions. lastly, we are increasingly relying on our partnerships with f.b.i. not just increasingly, but we must rely on partnerships to the fbi, cia, and others to actively leverage both our individual and collective authorities to protect the nation's critical technologies. through these four lines of effort, we can help mitigate the threats to our technology and information critical to our military advantage and, by doing so, deliver uncompromised capabilities to our war fighters. we recognize that strong relationships with industry, across the interagency, with our allies and partners, and with congress are essential to that success. we thank you for your continued focus on the threat, your understanding of the impacts to our war fighters and their capabilities, and your commitment to support our policies, programs, and the resources necessary to maintain our advantage. i look forward to your questions. mr. chewning: mr. chairman,

ranking member smith, numbers of the committee, thank you for the opportunity to speak with y'all this morning. i serve as the principled advisor for d.o.d. policies for maintenance of the u.s. industrial base. this includes assessing the national security impact of foreign investments. our national defense strategy outlines a handful of critical technologies necessary for maintaining u.s. military dominance in an era of great power competition. through those capabilities with unique military applications like missile defense and nuclear forces, the department of defense will continue to act as our nation's sole developer and technological first mover. but for those emerging technologies with both military and commercial uses, like artificial intelligence, we will also need to be a fast follower and adaptor of commercial sector innovation. therefore, full structure modernization requires legacy and commercial defense industrial base. chinese industrial policies of

economic aggression, such as investment-driven technology transfer and legal -- illegal intellectual property theft pose a multifaceted threat to our entire national security innovation base. a threat with the potential to create both long and short-term impacts. in the short term, their attempts to steal intellectual property, compromise our defense supply chain, and create economic dependences of the baseer of our industrial chips away our advantage. in the long-term spurred on by , strategic initiatives like one belt, one road, civil military fusion, and made in china 2025, this potential for china to erode our underlying innovation and industrial advantage. the engine of our national defense is always been the strength of our economy. chinese policies seek to extract technologies from western institutions, leverage our educational system to develop its own work force, and use subsidies and nontariff barriers to prevent competition and to enable the creation of national champions.

these national champions enjoy a protected domestic market, which they'll use to their relative advantage and enable them to grow at speed and scale, and then use all the elements of the communist state to place their national commercial champions at the top of critical markets and industries globally. these commercial national actors are then directed to compete globally against the united states and western firms while being given every subsidy and benefit that the authoritarian government can devise with the goal of marginalizing u.s. companies. combating these predatory economics require a whole of nation approach to both protect and promote american industry as well as our like-minded allies and partners. from a defense industrial policy perspective, this includes modernization of the complementary protection measures of cfius and export controls, as well as increasing the private sector's focus on cybersecurity. on the promote side of the ledger, we need to make sure the department is a customer of choice for emerging technology providers. this will require acquisition

processes that operate at the speed of relevance as well as budget stability so we can clear -- so we can send a clear demand signal to industry. thank you for the opportunity to testify on this important topic, and i look forward to answering your questions. mr. thornberry: let me just ask, as i mentioned at the beginning, one of the issues with which we will deal in conference is a modernization of the cfius process. that has been added to the senate defense authorization bill. there is an effort in the house to not only update cfius but also the export control regime which may be considered fairly soon in the house floor. regardless, this issue is before us. and what guidance can you, any of you, give us as far as the updating of cfius and export controls?

mr. chewning: i'm happy to take that first, mr. chairman. i'm sure my colleagues would also like to add on. we think of cfius and export controls as complementary tools for protecting national security. the secretary has identified three gaps in the current regime specifically around tech transfers, ventures, and expanded review of leases and real estate purchases so we can protect investments near sensitive military sites. what we suggest to you is that recognizing that both cfius and export controls need to work in concert to address these three gaps. secretary griffin: comment i would like to make, sir, is in the cfius process, historically, we look at one deal at a time. we don't look at the overarching pattern of such purchases or investments.

i think it is the broader pattern which is actually of greater concern. we also don't look at cfius investments or investment candidates from the perspective of -- let me just say the intelligence gathering opportunities it offers. for example, every firm today which even if it's not in a technology critical sector -- let me go to that extreme, but yet such firms all have highly networked software systems, controlled by commercial operating systems. every time that there is a software update to such an operating system, it affords another intrusion path into domestic networks. we don't look at chinese investments from the perspective of the mischief that might be made simply by having foreign ownership and, in some cases,

control of such avenues. i'll leave it at that. i believe that's as far as i would want to go at this point. mr. thornberry: my conclusion from that is we need to update cfius and export controls, but it does not fix all the problems. secretary griffin: it does not remotely stop there, sir, in my opinion. mr. thornberry: mr. smith. mr. smith: thank you. i mentioned in my opening remark the idea of having an industrial policy and what key technologies we should protect. that is very easy to say. it's incredibly complicated to implement in terms of how you do that. just what ideas would you have in terms of what an industrial policy would look like if we basically geared our trade policy and our internal investments to make sure that we were protecting certain core technologies? i realize you could write a book in answer to this question. please don't.

but if you could give us a little bit of a framework of what an intelligent industrial policy would look like. i don't think -- i think the president has the vague idea of the problem. then it's just like -- all over the place in terms of how to solve it. what would a more coherent approach look like? >> well, i'm not going to address any of the back and forth chatter in the current environment, because we're talking about a long term strategy here. we need to recognize that whether they are specific defense products or not, many things underlie our industrial base. i might, from a large list, as he said, sir, i might pick out for example microelectronics. we worry about that from the point of view of having a trusted supply -- kari mentioned that in her comments.

we want to know that we have an end-to-end supply of defense equipment, and i would also say commercial equipment, that we can trust. the difficulty in the microelectronics arena is that an area in which the u.s. once reigned supreme, thanks to now 20-some years of chinese investment, domestic u.s. manufacturers no longer, in all cases, make the best microelectronics. so we should be unsurprised when others elsewhere or anywhere in the world no longer seek to buy from us but seek to buy the best. mr. smith: can i shift the focus of my question a little bit to help with that. as i mentioned early on, some of this is inevitable. the rest of the world was going to catch up. i think a lot of people underestimate the impact world war ii had on several decades of us -- the entire industrialized

world got blown off the face of the map, and we were the last ones standing, basically. if you are going to fight a war, it's always good to win. it's even better to win on the road. and that left us in a very, very strong position for several decades. but that was highly unusual. so even if china wasn't doing all this nefarious stuff, i agree with the chairman, we need to go after the cfius -- we're going to have to compete. we're also, i think, part of our industrial policy, is some of what we're going to need, we're going to have to get from someplace else. would you say that, my conclusion, we need allies. we need people -- i don't think there is anything built in america anymore that's entirely made of america parts -- or anything built anywhere, for that matter, that doesn't rely on some sort of supply chain. what could we do better to make that aspect of it work? to have part -- countries that we can trust and work with?

secretary griffin: then i'll get off that previous path and refer to my opening remarks where we're today not drawing distinctions in our industrial policies between friends and allies and partners and people who behave in an adversarial manner. it is in our interest to make it easy for our allies and partners to cooperate and collaborate with us as opposed to making it easy for them to collaborate with china. and it is in our interest, in my opinion, for us to make it more difficult for the chinese to work with us. during the cold war, there was a whole of nation policy such that the idea of doing a commercial deal with the soviet union were words that didn't fit in one sentence. we do not have such policies today. mr. smith: i'll stop there. i have gone on too long. >> very quickly.

let me give a tactical example where that collaboration is taking place. as you know, the ndaa enshrined the national industrial textile base. a partnership including australia, canada, and the united condemned. we're using that to do a couple things. collectively, have we work -- how we work together to create a foreign direct investment screen so we can work in concert against predatory economics from allied nations. but also identify areas where we can do industrial-based collaboration to benefit us more broadly. mr. smith: thank you. sorry. go ahead quickly. ms. bingen: if i can also tackle that. from where i sit, i see it as my job not to make it easy for china to get this technology. in my remarks, i hit on four key pieces. security has got to be a fourth pillar in acquisition in addition to cost schedule performance. it is not right now. it would be incredibly complex to do. we have to put it into the regulations and mechanisms, etc. second, the excessive

transition, integrity of the supply chain and increasing our c.i. resources. d.s.s. in transition, it was amazing to me to see the approach we take to industrial security today is very much checklist-based. you go to a contractor -- do you have the alarms, locks, that's safe. it was not looking holistically out what are the technology or capabilities that you are providing to the government. what is the threat, what are your vulnerabilities? so now, based off d.o.d.'s critical technology priority list, going into these companies that work in these areas to look more holistically at all those different pieces. it will probably be uncomfortable for industry, but we need them as a partner to do this if we are going to deliver and compromise. mr. smith: thank you very much. i yield back. mr. thornberry: mr. wilson. mr. wilson: thank you for holding this hearing on such an important topic. establishing and maintaining our military's technological edge to -- is imperative in order to increase their effectiveness and

lethality on the battlefield while protecting our troops. the department must encourage and protect research and innovation from being stolen by state and nonstate actors. i'm concerned by the assessments provided today, but hopeful by the attention being provided by chairman thornberry and the house armed services committee. first, i'd like to welcome back secretary kari bingen as an alumna of this committee. we appreciate your service and wish you the best. so appropriately, the first question begins with you. is additional legislation needed to protect particular technologies and associated intellectual properties with military applications? if so, what technologies are in the greatest need of protection? why would legislation be necessary to protect them? and how should such legislation provide such protections? ms. bingen: thank you, mr. wilson. good to be back here. a couple areas i'd highlight. there's section 806 this year on extending the authority for us to strengthen the supply chain. we think that's a very good measure, and we're implementing those processes now to be able

to do that and excise out of the supply chain vulnerabilities. on the resource front, we'll have to work with committee on the specifics of this, but on the counterintelligence areas that i talked about, on the greater analysis that we will have to do with our industry partners to understand where their threats and vulnerabilities are, that will require additional resources. with the cfius reforms, whatever final legislation comes out of that, that will place an increasing demand signal on our intelligence capabilities. so that will require additional resources. then also, as we go through this delivering uncompromised and d.s.s. and transition, as we look at how we implement control -- how we implement protections on controlled unclassified information, we may need to come back to you with specific legislative proposals and work with you on that. mr. wilson: thank you. if anyone else would like to respond. if not, a general question for everybody. is this primarily a nation safe problem?

what about transnational criminal organizations, multinational corporations, or terrorist groups? what risks do nonstate actors pose in transfer of u.s. intellectual property and technology? secretary griffin: sir, those are important issues as well, but the bulk of all the information we have gathered is that china is the big problem. i think we need to focus our efforts on first taking care of the big problems and then absolutely we cannot afford to neglect other areas such as you suggest. but we have to prioritize. mr. wilson: in particular, as you identified china, the confucius institutes that are located in 103 different colleges and universities across the united states, many of these are located adjacent to research

facilities. is anyone familiar with the confucius institutes, which has been identified by a member of the central committee of the communist party of china as a very important propaganda arm. is anybody familiar with what's being done to try to identify these institutes as to their motives? mr. schinella: speaking to your original and second question generally. i agree with my colleagues this is predominantly a state actor problem. or that is certainly the largest, most looming problem within that china is the most pressing threat. with the additional amplification that in the case of a country like china, you asked about multinational corporations. when you have state-owned enterprises, our framework doesn't necessarily capture that blurred line between the multinational corporation and the state actor itself.

we're familiar with the confucius institutes as one more visible representation of china's global presence, including in the united states. consistent with my earlier remarks i just note that is one of many, many footprints that beijing has in, near, and on our campuses and research institutes that it uses as ways to overtly and less overtly collect on and maintain awareness what's happening on those campuses and institutions. thank you. mr. wilson: thank each of you. we appreciate your service to our country. mr. thornberry: mr. gallego. mr. gallego: thank you, mr. chairman. even before getting to congress i have been hearing about this, reading about this. more so now i am in congress, i'm dismayed that i'm hearing

about the diagnosis, not necessarily the way to fix this. in the marine corps, you have a couple options. to protect yourself, you have your body armor, kevlar. more importantly, you have your rifle. and the best way to stop somebody from trying to attack you is to look tougher and make sure they know the consequences if they do attack you. i feel when we're dealing with this issue that we're talking about how to only play defense. what are actually our offensive options to actually make our "enemy" understand that if they do these actions it's going to be painful? obviously, to a certain degree, i don't want to trigger a war, but we need to be able to have sort of a deterrence so that way they actually have to make a rational calculation whether or not they are going to engage in this type of conduct. if not, i feel like this is just going to continue to happen every year, i'm going to have the same briefing, and all we're going to talk about is what happened, and not what we can do to stop them.

i don't know who wants to take the question first. i would like to hear some ideas. if we have to do this in a classified setting, that's fine, too. but love to hear it. and welcome back, too. ms. bingen: sir, thanks. if i can start, from an industrial security perspective. that's what i'm here to represent. my focus is clear defense contractors and i outlined the four areas, the four pillars. two other areas. we're branching out, and as mr. schinella highlighted, there is a deep concern with the cyber data exfiltration issue. it is one the chinese in particular are targeting. one of the directions that is my boss, the undersecretary, has given to defense security services is to come up that program protection plan, , with the policies for how we control with an industry that unclassified information yet still potentially have sensitive may technical information or personal information. that's one of the areas we're hitting.

the other one i agree with you. we're playing defense right now, particularly in the cyber domain. we need to be playing more offense. we need to be working with the f.b.i., leveraging their authorities on the law enforcement front. but that will require further conversation with you, largely the classified level, on some of the authorities and resources we might need to do that. secretary griffin: at the unclassified level, i will say that it is through cfius and possibly firma in the future and other mechanisms. it is our choice as a nation, as a matter of national policy, as to whether or not we allow investments of any magnitude and scope by china in this country. mr. gallego: not to cut you off, but my point i have made is that you are all describing defensive protocols and methods. it doesn't really matter to the chinese or to our foreign adversary if they know they can get around our defenses, and there is no consequences.

so what are we actually doing to change the rationale, the calculations that they are going to actually do these types of things that ostensibly are illegal? what is our pushback? mr. schinella: obviously, the administration's section 301 investigation, the chinese intellectual property theft would be an example of that. i think more broadly if we think about the offensive measures we can take from an industrial based perspective, what are we doing to promote our own industrial-based capability. i think that, from a dod perspective, starts with the recognition that, going forward, we have to not only remain the sole developer for military applications but reform the acquisition process in a way we can leverage the entire broader economy. and become a customer that is able to attract the best of both the heritage defense industrial >> thank you, i yield back.

you, mr. chairman, for having this important meeting. i amis an occasion where going to agree with mr. gallego 100% which is not -- [laughter] which is not a daily occurrence. i'm going to ask the same exact question kerry what are we doing offensively? you talked a lot about some that defensive measures contractors have. and i applaud you for doing that but i would like to see more in the way of consequences to the -- when they they do this adverse behavior. comment where both

parties have been rather passive . i would like to applaud the trump administration in the way of trade that there ought -- that there is pushed back going on. -- to put out wrong information. pretend it is great technology and they steal it and it will not work for them. or they go down a dead-end or waste money or it backfire somehow. that would be an interesting thing to pursue

where we start poisoning some of the technology that is ostensibly vital, healthy, and good but it messes them up when they start to pursue it. any thoughts on that? answer a partld of that and then defer to my colleagues.

mr. chewning: just elaborate. section 301 investigation of the ustr led into theft of chinese left of u.s. intellectual property does have some offensive measures to it. and was articulated in a memo from the white house on the 29th of may. there's the tariff action that's been associated with that. there's potential for investment restrictions into the u.s. economy. and the w.t.o. case that we have taken forward. specifically to dispute -- there are offensive measures being done in response to chinese economic aggression. i'll defer -- mr. lamborn: i'm glad to hear that. ms. bingen: i would love to follow up with you in classified session to talk more holistically we're doing or looking to do. mr. lamborn: ok. good. lastly i'll finish up. there was an article in the "wall street journal" today or yesterday about some detected chinese hacking on our space operations. it was on not research and development but on the operation side, which indicates that there's an intent in the future, perhaps, to use that information to be disruptive. to disrupt operations. in an offensive way. possibly in the time of conflict. does that concern you? secretary griffin: sir, that's a topic that i really do not want

to discuss in a public setting. broadly speaking, your comment taken on its face is very concerning. for me it's very concerning to have read about it in the papers. as my colleague just said, i would welcome the opportunity to discuss this stuff in a more closed setting. mr. lamborn: with that i yield back the balance of my time. mr. thornberry: mrs. davis. mrs. davis: thank you, mr. chairman. thank you-all for being here. while we have raised the issue of trade policies, i wonder if you could comment, i'm not trying to make this into a debate here in terms of trade, but what we mentioned a number of areas, particularly related to china. was it a real missed opportunity to have not moved forward on the transpacific partnership when it comes to national security?

secretary griffin: i'm unable to offer you an opinion on that, ma'am. i'm sorry. i'm not familiar -- i just don't have the expertise to comment on transpacific partnership versus national security. mrs. davis: because, in many ways, maybe you like to comment, i think we lost that opportunity to have china be more disruptive when it comes to that. did you want to comment? mr. chewning: i agree with the undersecretary. it was not an issue we looked at specifically. i don't have any further comments. mrs. davis: maybe that's some of the problems. i think that we were aware that national security was an issue in this regard, and it's -- i guess surprising to me that there wasn't that kind of weigh in when it came to those issues. i wanted to ask you further, we talk about a whole government approach. we're often doing that.

yet when it comes to the concerns that you are raising here, how important is it? are you monitoring that? are you -- are we engaging those elements of governance and government that historically or traditionally we don't think of in this area of intellectual property or endeavors? where do you think it is? how did the department of state, treasury, justice, homeland security contribute to technology protections? are there other roles that the department of education, health and human services could be playing in this regard? it's a complex issue and i'm looking to see -- to what extent do you think that that's important? secretary griffin: i'll start. i do think it's important. i have said publicly, actually i believe in an earlier hearing before this committee, that we

somehow in the years since the berlin wall came down and the soviet union dissolved, we believed that great power competition was behind us. the national defense strategy released this past january makes a very clear set of points that we are -- have returned to an era of great power competition and must treat it as such. when we believed throughout several decades of the cold war, when we believed we were in a great power competition for not only the hearts and minds of the world, but possibly our very existence, we treated all the matters that you are talking about, state, education, commerce, treasury, we treated

all of that as if it were of existential performs, which it was. today we treat them as if they were individual matters. what you are hearing from us is they are not isolated issues. they need to be treated in the large. as i was starting to answer to mr. gallego's question earlier, we as a nation have choices. do we wish to admit, as we have today, 30,000 chinese ph.d. students in stem areas, do we wish to do that? do we think the benefits outweigh the gains? there is not a national decision in that regard as there was when we were competing against the soviet union. we didn't do those things. it's not for me to say whether we should or should not. i'm trying to put on the table that these apparently isolated decisions in fact when taken together comprise a whole of government strategy that we do

not have. mrs. davis: i don't know if anyone wants to comment. is there one particular example that you think creates best practices in this in a more nontraditional way of working together that we ought to be looking at more seriously? i guess not. thank you. mr. thornberry: dr. abraham. dr. abraham: thank you, mr. chairman. huge problem, national security issue. and the mentality of why build it when you can steal it. we get that. i was listening to ms. bingen, you had your four pillars. one of those was a program called delivery on compromise i think is what it says. my question is, for these contractors and subcontractors

is there a management by objective policy that if they don't meet objectives they are penalized or punished? or if they don't reach that security level they are kicked out of the system? is there any accountability today? ms. bingen: you have actually hit on the challenge and why we're taking this different approach. when a contract is awarded it a -- when a contract is awarded to a company, it's based on cost, schedule, performance. it is not based on security. so part of this delivery on compromise initiative is working through all of the details of what would that look like, what are the standards? is there an independent verifier that does the good housekeeping seal of approval on it? how do we work with our acquisition colleagues on infusing security into acquisition policies and other regulations, and the contracting officials that help drive those decisions. those are the details that we're working through now.

then also industry can't look at it the way they do today, this is a cost center and loss to my bottom line. they have to be incentivized to look at security as, this is going to help me make more profit. mr. abraham: are they held to that standard now? ms. bingen: they are not. mr. abraham: quick second question. classified versus unclassified, we understand that today's classified data is yesterday's outdated data or vice versa. this data evolves so quickly and this technology evolves so quickly it is hard to keep up with. and that if you take two unclassified pieces of data and perhaps marry them together, it becomes a classified document. my question just for my understanding, who actually has the authority to make the call as to whether a piece of data or piece of technology is

classified or is unclassified? is it the project manager's? somebody in d.o.d.? somebody -- what wheelhouse makes that decision on a daily basis? ms. bingen: undersecretary for intelligence has the policy responsibility. so we set the framework and basic standards. mr. abraham: you have the responsibility. but do you have the authority? do others under you also have the authority? i understand the responsibility. that's where the bullet does stop there. the authority can be delegated out to other people. is that a lot of fingers going out? two or three people? how does that work? secretary griffin: in the technology arena, i have original classification authority. should i make a determination that a particular set of technologies upon which we're working needs to be protected. and many others do as well. those authorities can be delegated and are delegated downward.

i know there have been breaches. we had reference to that earlier on today of actual classified information. but i will go on record, sir, as saying that i believe this hearing and our witness statements and responses to questions are more about the amalgamated effect of the industrial base and technology levels as a whole not whether or not a particular exfiltration attempt by the chinese was successful in a particular case. but rather the whole pattern of chinese investment in our industrial base, extraction of data, predatory joint ventures, predatory trade practices. the whole spectrum of chinese adversarial behavior with respect to our economic and industrial base.

i believe that's the larger concern, sir. mr. abraham: i understand the 30,000-foot view. i also understand the ground level view if we have that one breach on national security issue, it can certainly parlay into something much bigger. secretary griffin: absolutely. mr. abraham: i yield back. thank you. mr. thornberry: mr. larsen. mr. larsen: thank you, mr. chairman. mr. larson: on the gate about whole government approach, aim just concerned you throw the term around like it's candy at a parade because at the same time you have testified that someone, one of you did, that belt road initiative is problematic policy. at the same time you testified, department of commerce, bimonthly meetings with u.s. companies and u.s. embassy in china to figure out ways for

those u.s. companies to access projects. to save time you talk about whole government approach. not going to be experts on trade or t.p.p. but have some concept of what the argument was on transpartnership and how it fit into leveraging u.s. economic policy and strength in asia vis-a-vis china. just that basic understanding would be helpful for you-all. i don't think you are talking about whole government approach. you may be talking about a whole pentagon approach. if there is a whole government approach, which like to know t -- if there is a whole government approach, i would like to know. not today. but an example, if we're an era of great power competition, you talk about the last one we had, we're not doing those things

today but we did in the last one, well, in the last one we had we fought for open markets. we put human rights near the top of the list when we talked to north korea. we're not doing that today. so does that not apply to this era of great power competition? again, i think you are throwing the term around to try to make it sound like you are doing it, but i don't think you are. and you need to get on it. you need to have a mechanism -- if we don't have a national security council mechanism that could develop a whole government approach that's used by the white house, then we might have one. that's -- i usually don't give speeches. i usually ask questions in my five minutes. it's just been frustrating to hear this term being thrown around. again like candy at a fourth of july parade. i don't think you are living up to it. miss bingen, i wanted to ask you about a couple questions -- four points on what you are

doing. specifically on i think it was your third or second point of and six1696 authorities and strengthening supply chain security and defense department. that's great. that might favor a larger contractor. so -- because they have the capacity to absorb the costs, if you will. how are you going to ensure that smaller companies, smaller businesses that maybe have more innovative ideas can bring more flexibility to the table, the pentagon, how are you going to ensure they don't get tossed aside because they don't have that capacity to do the kinds of things supply chain security you might be asking them to do? ms. bingen: that's a great question. that's something we'll have to work through. we're really just at the front end of that. 1696, we're putting together the plan for it right now. i think it has to be early next

year, 2019. that is something we absolutely will have to consider. i don't know that i have a good answer for you today, but it's something that we're looking into and would be happy to follow up with you. mr. larsen: if you could. your staff on the committee when we did a tour around the country with small businesses and chairman shuster at the time and i went around the country and tried to find ways to bring small business more into the pentagon contracting. just ask you to watch that. ms. bingen: we'll also have to work with them as we do the delivery and compromise pieces. they don't have the capacity that a lot of these large folks do. it's how do we incentivize them. how do we work the liability issues to encourage them to report and to make these fix -- to make these fixes when they don't have that big capital that the large folks do. mr. larsen: again, for me the crux of it is that this is where some of the innovation that we need to have happen.

dr. green, mr. green griffin, wants to have happen. a lot of this will take place in smaller companies, but we don't need to be building hurdles to make it more difficult for them to do that. i would ask you guys to watch that. thank you. yield back. mr. thornberry: mr. gallagher. mr. gallagher: thank you, mr. chairman. this is a great hearing to have. i think sometimes we overlook the issue of technology transfer and just to follow up on what was said about the need to go on offense, as we're considering a few initiatives, obviously the need to strengthen cfius. i would also like to call your attention to section 217 of the senate ndaa which provides the usdr&e with the authority to establish or fund a nonprofit entity to help facilitate research and technology development in critical hardware based technologies at the private sector has tended to insufficiently support and could

help meet emerging security needs. i know it's a long bill. but have you-all maybe starting with mr. griffin been able to take a look at this provision and from your initial read do you support it? secretary griffin: yes, sir. i have read that section. i have worked with some of the folks that are promulgating that initiative, and i support it. mr. gallon lager: that angle of -- mr. gallagher that angle of : the need to invest in hardware. we spend so much time about software and not hardware. mr. chewning: it's a great point. to build on it about 92% of our capital investment is in software. we know hardware and company formation in particular hardware technology is going to be critical. so i think taking that language in addition to exercising the authorities given to us by congress in section 1711 last year's ndaa we can pull together

a response. mr. gallagher: i appreciate that. i look forward to helping this provision get over the line. i think one of the biggest challenges you face is those of us in the room here today may understand the scope of the challenge but much of the broader society doesn't. i think our competitive edge in many cases hinges on more people just getting it from the promising researcher who takes a second look at an attractive offer to join a state connected chinese firm, or graduate student who decides maybe they shouldn't conduct ph.d. stem research in china. i know this hearing is about solutions for d.o.d. i would be fascinated to hear your thoughts on how we can better communicate the story we're hearing today to the broader population. in reading the diux report on technology transfer, one of the key proposals is outreach to the private sector and academia. how do we -- how can we more effectively conduct that outreach to private sector, academia, and public more broadly.

i know it is a big question. mr. chewning: increasingly through our industry association engagement not just with the folks you think we would be talking about but more broadly. increasingly we're hearing those concerns. from the industry associations. i think it's the need to begin to separate the need for an incremental revenue opportunity where you may be going into a new market, to the longer lens necessary, recognizing that you are going to be doing business with someone who eventually wants to put you out of business. and the need to get that message across. mr. gallagher: we have had these recent stories about certain silicon valley companies not wanting to do business with d.o.d. because of sort of the intersecting with lethal drone operations. huge problem at the time we need to be working more closely with the googles and amazons, facebooks of the world. that's sort of the cultural

reaction to working with d.o.d. i wonder if you would comment on that briefly. how do we turn that conversation around? if it makes any sense. ms. bingen: absolutely. we're disappointed in that. but we also know, particularly artificial intelligence, that's where the talent, that's where the technology is. the government is not leading in this area. we need to be able to leverage that. they look at -- when i think about the numbers of transactions, data sets they have. some of the problems may be pretty straightforward for them given what they do in the commercial sector and we have to leverage that. for us from intelligence perspective we have a clear mission imperative. we have manual labor intensive process that is our analysts undertake every day. we have to make it better for them and use their brainpower more effectively. but department wide there are a lot of other challenges that we have -- logistics, business reforms, etc., that would benefit from them. and we've got to believe there

are folks there that bleed red, white, and blue and want to participate and support national security but also the engineers like our problems and we have good ones for them. mr. gallagher: i have run out of time. i have a bunch of other questions. thank you. what you are doing is an important subject. i yield back the balance of my time. mr. thornberry: mr. langevin. mr. langevin: i want to thank our witnesses for your testimony here today. the committee and my colleagues, i believe a comprehensive whole government approach is needed to maintain u.s. technology superiority as you have heard from many of my colleagues. it's a problem we run into is that democratic states have no problem marshaling their collective resources to their advantage. so what are your recommendations to congress for policies that maintain our technological edge in critical areas by countering activities of nations, while fostering a culture of innovation in the united states?

secretary griffin: i'm fond of saying that the best way to get ahead and stay ahead is to work harder. run faster. we believe that our free market capitalist system, capitalist-based system is the seed of innovation to a far greater extent than any command economy can achieve. indeed, the entire topic of this hearing is about china stealing from us, not us stealing from china. so if we can provide the kinds of incentives that my colleagues have been talking about, we just mentioned 217 for new authorities for hardware based venture companies, if we in the d.o.d. can, using the authorities that you have given us, learn to deal with our

industrial base on a more commercial basis, on a quicker and more responsive manner that is not so burdensome to our companies, i think those actions will help us stay ahead. the mere recognition that we're in a competition and that we should not be making it easier for our adversary will help us. my colleague, kari bingen, outlined in the statement four broad areas we're very serious about. other than those more general statements i don't know that i have any specific things to recommend to you. mr. langevin: ms. bingen, do you have anything to offer? ms. bingen: i think i would just echo what dr. griffin just highlighted. my job, sir, i look at my job

slowing the chinese and others down from getting the stuff. his job is to push the envelope on our technology investment and r&d. my fear, big concern is what's being taken from us now, the r&d we're both competing for, we're both interested in the same things right now, that is what's going to show up on the battlefield five to 10 years from now. we need to slow down our adversaries and speed up our own capabilities. secretary griffin: let me amplify my comments. one of the best assets we have is the openness of our society and our alliances and partnerships with our western allies. the more that we can find ways to do things jointly with them and binding them to us, that is a positive step we can take, sir. thank you. mr. langevin: there are many promising ideas that the department has invested

intellectual equity in of the only to see those ideas and programs end up in the valley of death. recognizing the remaining utility, other entities we can swoop up any gains made at that point and move forward from there, i find this troubling. i'm sure do you as well. programs like hypersonics and directed energy where we invested but our competitors have taken our ideas and our investments and continued to innovate. do you deem it a risk when we worked on and developed a technology, but failed to fund the transition? i also are there policy impediments that slow technology transfer to our own forces? secretary griffin: sir, the national defense strategy released in january, frankly, makes a big deal out of the point you have just raised, and has specific modernization --

force modernization goals for the future fight that are outlined in that strategy. and we're working today, this week, this month, next month to enshrine these, to codify these in the upcoming budget preparation. we have done groundwork, important groundwork and directed energy, especially in hyper sonics especially, that we have, if you will, let lie for a while we when we should have been turning it into actual force. we're trying to reverse that trend. we're working with all deliberate speed to do that. the two areas that you mentioned, hyper sonics and directed energy are major

candidates for revectoring. i'm working on that as we speak. mr. langevin: the sooner the better. i yield back. thank you. mr. thornberry: mr. hice. mr. hice: thank you, mr. chairman. it was discussed and brought up the need to better balance risk to speed when it comes to prototyping. can you expand on that a little bit? explain why that's important? secretary griffin: my favorite topic, sir. that's because in my more useful years i did that for a living. i now hope to enable others to do it for a living. i think the key point that i would make is that if we can return to what used to be this country's ace in the hole, our ability to try out new ideas, cobble them together in prototype fashion, take them to the test range, fly them off, see how they work, fix them where they break, and plump them up where they are doing good, then let operators interact with them because designers and operators need to work together. when we can develop new things

in that fashion, that is the best of this country. we have let our processes get in our way. by that i mean our legal and contracting processes. the congress has bent over backwards to offer broader permissions by which we might undertake these developments. if i have a single mission in life as the new undersecretary in this area, it is to get our guys in the field working again on these new ideas and let nature tell us which ones are good. the key point is it's important to recognize that a test failure is not a failure. the failure is when we don't stick to the goal and get the product to the finish line. mr. hice: i'm glad to hear that. i'd like to follow up on where dr. abraham was going earlier. i'm not sure exactly who this would be addressed to. maybe a couple of you have an answer.

how do we incentivize companies to comply with the deliver uncompromised? ms. bingen: sir, that's something we're working through right now. we have had actually someone come onboard and do a study for us and working through those recommendations. the some of this will be outside our area where -- it comes back. how do they look at this so it's not a cost but a profit for them? how do we get them to encourage them to self-report but not think that there is going to be a liability or penalty associated with that? are there tax incentives we can pursue? regulatory incentives? safe harbor ideas?

we're working through all those right now. we do think there are some concrete ideas we can explore to do those incentives. mr. chewning: i think it's extremely important to solidify this. would you agree? ms. bingen: absolutely sir. mr. hice: anyone else have a comment? secretary griffin: we need through a combination of public policy, tax code, selection criteria for our procurements. we need to make it in the interests of our industrial base to protect their own intellectual property from theft. when it is in their interest to do so, when it is a profit center rather than cost center, when they care about it as much as we do, then that will turn around. mr. hice: while you're going on that. how well integrated is the executive branch on the whole threat here? secretary griffin: that might be above all of our pay grades put together.

mr. hice: you are dealing with this. just from your observation. secretary griffin: it depends upon who you talk to. really. the interests of the -- primary interests of the commerce department is to promote commerce. the primary interest of the intelligence community, i won't speak to that, we have intelligence community representatives, but as kari has said a couple times, their goal is to protect what we have. those two -- mr. hice: is d.o.d. and the intelligence community cooperating at least? secretary griffin: we, i think we are, sir. ms. bingen: daily, weekly, monthly basis. i get office meetings. mr. hice: thank you, mr. chairman. i yield back. mr. thornberry: mrs. hartzler. mrs. hartzler: thank you very much. thanks for being here on this very, very important topic. there was a recent article in foreign policy magazine that discussed how china has create -- has created a sophisticated

state surveillance system with facial recognition technology. specifically to target minorities and what they call anti-china behavior. they developed this system with the help of chinese surveillance firms. high vision is about 42% owned by the chinese government and its chairman of the board was quoted as saying that the board must ensure the company, quote, creates a state-owned enterprise and that it remains, quote, under direct control of the communist party central committee. in fact, they received $3 billion line of credit from the state-owned china development bank. this is one of the three so-called policy banks whose finances objectives follow political motives. i'm sure can you imagine i was alarmed when i learned that the cameras were operated at a military operation in my district. the cameras have since been removed but i am disturbed that the federal government willingly purchased these cameras knowing that china is actively engaged in espionage against the united states. my question is, i'm deeply concerned that video surveillance and security equipment showed by chinese

-- sold by chinese companies exposes the u.s. government to signature vulnerabilities due to potential built in back doors creating a video surveillance network for china purchased by the taxpayer and installed courtesy of the u.s. government. i would like each of you to discuss the security vulnerabilities posed by chinese surveillance cameras and whether or not you believe it's a security risk to have them operating at u.s. government facilities. mr. schinella, you want to start? mr. schinella: everything you laid out there is consistent with some of the threats which we tried to point a flashlight out in our opening statement.

you have essentially a state-owned other certainly state invested company. and you've got an example of the sort of -- you could characterize it as an insider threat, if you will, but the chinese government's relationships with these kinds of companies, which have a worldwide commercial presence poses the threat you have identified. and as my colleague says, it's also an indication of the different kind of world we had. we weren't buying surveillance cameras from the soviet union in those days, but when you've got chinese companies making world class equipment on a global market, they pose a threat that is different than we faced during the cold war. mr. chewning: it's obviously a concern. something that we're actively that. and that we'd have to take you through in a classified setting to discuss similar vulnerabilities we have identified and what we're doing to remediate them. ms. bingen: if i could also just add. going back to the supply chain discussion we had and the policies associated with that

and the congressional engagement in the direction that you-all provided us. there are three areas of the supply chain i worry about. going through the front door. the cyber exfiltration, and us making it easy for them. it's the backdoor piece. third, there is the counterfeit piece. we need to look holistically at all those and mitigate threats along all three of those sectors. mrs. hartzler: mr. griffin, anything to add? secretary griffin: shockingly for me i have nothing useful to add. thank you, ma'am. mrs. hartzler: mr. schinella and mr. griffin, you mention in your comments concerns about universities and the chinese using the universities. that's something i'm very concerned as well. the national intelligence council, you provided us with this chart that shows the different programs that china has in talents recruitment. and of the snapshot that is provided here, approximately 2/3

of these individuals worked or studied in the u.s. and are employed in china in areas such as defense research, technology, state owned enterprises, academia, and things. mr. griffin you said it's not to me to give a recommendation. i'll ask mr. schinella. do you think we should change our visa system to deny chinese students being able to participate in ph.d. programs? mr. schinella: as part of the u.s. intelligence, it's even less my mandate to make policy recommendations, but as the intelligence product you have illustrates and as my opening remarks indicated, china through

a state directed policy absolutely is trying to make the most list it and illicit often through absolutely legal mechanisms exploitation of their ability to take advantage of the u.s. university system. mrs. hartzler: thank you. mr. thornberry: mr. bacon. mr. bacon: thank you very much. i want to ask you a question about some of the areas we're seeing advances with technology. we keep seeing advances of stealth. we're seeing higher capacity computing power which is changing a loft our weapon systems. hyper sonics, nanotechnology. a few of these i want to ask a question. how did we fall behind in your mind on hyper sonics? what can we learn from that? i open it up to anybody. secretary griffin: let me take that one first. we fell behind because while this nation was pioneering in that era, we decided some years back that we did not face a

significant threat requiring the delivery of force by means of hyper sonic weapons. so we as an earlier questioner asked, we didn't transition those. we could have. we just chose not to. our adversary, china, has gone on to develop a very, very startling capability in that area. we certainly can match and exceed that capability. and we are setting about that task. but we fell behind because we elected to make other choices. mr. bacon: let's focus on the middle east. probably occupied -- >> there is the tyranny of the urgent versus the long-term and truly, i lived through all of this. cold war competition and such. one of my political adversaries labeled me as an unconstructed an unreconstructed trade

war i don't remember. we have for 25 years that the great era of competition is over. and it is not. mr. bacon: reading about robotic technology and russia is investing a lot. would you say, where are we at compared to the russians, if you could elaborate? >> i don't believe that i know i can give you an assessment for the record later. i will say in the area of autonomy and robotics, as my colleagues said earlier and quite well, the d.o.d. is a small player with regard to where commercial industry is. now, that's not bad. our commercial industrial base is the biggest single asset that

we have for national security. but we need to make it attractive for them to continue work in this area and make it attractive for them to partner with us to reap those advantages. mr. bacon: one last question on this line and give someone else a chance, nanotechnology, what militarization will do to the battlefield. they will have weapons systems that are smaller and harder to detect and perhaps just as

lethal than what we have today. >> the innovations you are describing are exciting in a lot of fronts because of the applicability we have. it draws an important distinction and talked about the industry to push to us. and there is a pull effect. and the innovation of our war fighters to determine how they will impact and providing that feedback. i think this push-pull concept, we take commercial insights and figure out what the applicability is. mr. bacon: anyone want to jump in on those questions? ms. bingen: i do want to bring us back to china as well and when i look at some of the trends out there and frankly, it is less about us protecting but making it a national priority. they have 16 megaprojects -- these are manhattan-style projects. the u.s. drops 11% between 2000 and 2015 and china. -- and china increased to 21%.

stem degrees. chinese universities are putting out 1.3 million students with stem back grouped, we have 325,000. and the onus is on us to make these challenges to be a national priority. mr. bacon: if we have time at the end, i would like to come back around. but i yield. >> mr. banks. mr. banks: dr. griffin, i along with 25 members sent a bicameral and bipartisan letter to the secretary of education earlier this week on tuesday that expressed our concern about the links to the chinese government. it has so-called research partnerships with over 50 u.s. universities and likely using these relationships to exploit the culture of our schools and communities as well as gain access to critical next generation technologies.

used thesey have relationships for spying and committing industrial and economic espionage. meanwhile, the d.o.d. policy that governs technology transfer is dated back to 1999. at that point, we had no idea what an iphone was. we were worried about y2 k. and the usb flash drive had not even been invented. the world as i'm sure you would acknowledge is different technologically now than it was 19 years ago. dr. griffin, considering the emerging competition with china and the need to protect our needs, what is the d.o.d. to do to protect the research from foreign threats and unvetted members with uncertain loyalties? and what are you doing to assist the secretary of education in mitigating risk to universities and other schools and help the federal government to protect

and advance the united states' technological advantage. secretary griffin: that is a bigger question then i think i can answer. eric might be more capable than i. i share your concern and i have alluded to the number of and existence of so many chinese stem students in the u.s. i completely share your concern and well documented this is an avenue of access for the chinese that we don't want them to have. beyond that, i don't have any detail for you. eric. mr. chewning: before we move -- >> are you too concerned about the dollars that fund academic research on universities in america that on our behalf are engaged in classified research for d.o.d.? >> i'm concerned that we have

ties -- i'm concerned that we are not yet as vigilant as we should be making sure that that research doesn't go to those places that have those ties. universities have a very long multi-decade history of collaboration with the national security community writ large on problems of national interest. it's one of our greatest strengths. but doing so in an environment that can be penetrated by add -- that can be penetrated by our adversaries is not wise. >> we are not as vigilant as we should be? >> agree 100%. we are concerned and reviewing the contract language and reviewing those projects at the universities. more broadly this hits on the , hard issue, we have an open innovation model and we have an

adversary within that model and operates a closed model on their side. we need to experiment to find the structural fixes without breaking what makes our system work. >> are you aware of any interest by the u.s. department of education and these ties at the subject at large? have you had any conversations with the department of education? ? i have not. >> i have not. i would be happy to do so but i have not. another difference between now and 1999, which you cited, china had not been admitted to the world trade organization in 1999. and i might make the point that was truly a seminal branch point that allows many of the types of intrusions of which you speak. >> i yield back. >> let me follow up with just one question for mr. schinella and ms. bingen.

as a practical matter for our purposes, should we see any distinction between the chinese company and the chinese government? if the chinese company is investing in some technology, some business, something going on, as a practical matter, should we see that as the chinese government doing it? >> i would say the degradation -- but whether you have a wholly-owned state-owned company that is an element of the chinese government or a private company that the chinese government still has leverage over back in china, there may be a spectrum of risk. but at no point in that spectrum , is the risk at zero. ms. bingen: china international law says that all organizations

and citizens shall support, cooperate with and collaborate , in national intelligence work. mr. thornberry: that's what i thought. mr. bacon? mr. bacon: i know cfius has an important role and we need to protect our technology and make sure it is not being sold or exported. i heard from a couple of companies that thought they were unfairly limited. and i want to know from the d.o.d. perspective shouldn't we have an appeal authority to say, cfius gets it wrong once or twice on whatever company they hold back, do you have any thoughts? >> if there is any specific case, we are always able to

provide briefings and explain the rationality. as a representative, companies may not be aware of the full fact base that we have, because we conduct it by the intelligence community and why certain companies may not think we got it right. mr. bacon: shouldn't there be a recourse because i'm hearing your appeal authority and granted, i'm sure you get it right 99% of the time. there has to be some kind of board at the d.o.d. level and gives you a chance to make that case and people could agree or disagree. but some of the companies are saying there is no other appeal authority. >> i'll take it back to the exp. -- i am certainly happy to take that feedback back to the

committee. mr. thornberry: as luck would have it, votes have been called. this worked out just right. thank you for being here and your insights. we will continue to have conversations on this topic. hearing stands adjourned.

>> anything we can do for you -- >> thank you, sir. we appreciate that. >> coming out of this hearing, do you see opportunities for this committee or congress as a whole, to act? >> there are opportunities because of the provisions already in the senate bill and provisions that are in our bill.

so, yes. >> do you think it provides any context to the "washington post" report to the data contractor breach? thisat i took away from hearing was not to look at just any particular sort of incident that we may read about what to look at the broad pattern of activities. and the real concern for national security. thing is what they are doing across the board that is so concerning. and as you heard today, we are not going to pass a bill that will fix it all but we have a lot of catching up to do because we have not updated our laws to reflect the change in world circumstances or the change in technology. >> [indiscernible]

>> you know the position of this committee from last year. we had in our bill a space within the department of the air force and as a part of last year's bill, while the senate did not a great, i think with what we had, as a part of last year's bill, we were required the department to give us a roadmap on how you would get there assuming that decision where to be made at some point. i think that roadmap is even more relevant today than it was a week ago. [indiscernible] >> we will see what the department recommends. from the president and this committee, on a bipartisan basis, we have to pay more attention to this space. it is a war fighting domain. we have to protect vital, national interests in this space. are you waiting for the

defense department come up with a roadmap or a plan? thehis bill requires defense department to come up with a space command. we will go through with this recommendation from this conference but we will see what the department has moving forward. there has to be a partnership between congress and the executive to move in this direction. >> are you feeling any tension between the goal of halving the 3%-5% overall growth and the -- and the degraded blank of the force? >> we can afford survival. is the bottom line. we can afford to do what is necessary to protect this i probably don't need but i will remind you -- we are

down to 15% of the federal budget spent on defense. that is not very much to protect. see you all. >>, live, your calls and comments on "washington journal ." newsmakers with charles grassley, chair of the judiciary committee. after that, president trump signs an executive order to reunite migrant families. this language of attack, of harm, of damage that by expressing an opinion that people do not like, you have inflicted an injury. i found that very striking.

and frankly, rather frightening if the truth be told, and quite emblematic of the way the left is now responding to any sort of sense and especially one that grievance, identity, à la ticks which is everywhere and has of -- and has infected everything. on theessor amy wax limits of free expression on college campuses in the united states. tonight at 8:00 eastern on c-span's q&a. >> this morning, georgetown university professor michael eric dyson discusses race relations in the united states. then, the president of the migration policy institute talks about u.s.-mexico relations. and later, author and