Testimony From Peter Harrell on Tools to Counter the CCP’s Industrial Policy and Supply Chain Threats

Committee
The Select Committee on China

Hearing Title
Import Controls: Tools to Counter the CCP’s Industrial Policy and Supply Chain Threats

Date
September 16, 2026

In his testimony to the House Select Committee on China, Peter Harrell argued that the United States should act before Chinese products establish themselves in the American market rather than after. He pointed to Chinese internet-connected vehicles in Europe and other unrestricted markets, where they climbed from low single digits to 20–25 percent of new sales in 18 to 24 months, and warned that US market share could follow the same path absent strong and durable action. He made a parallel case on humanoid robots: a decade ago, China built the entire industrial ecosystem for drones, which the United States is now recreating at great cost, and the same dynamic will play out in robotics unless the industrial base is established domestically now instead of relocated at a cost of tens of billions of dollars years from now. To get ahead of such problems systematically, he recommended that the federal government conduct a survey of US import vulnerabilities — identifying which products depend on imports and, among those, which depend specifically on China rather than on diversified or allied sources — modeled on an exercise Australia completed several years ago.

Harrell also addressed the ways restrictions get circumvented. He described two forms of Chinese evasion: the illegal practice of relabeling Chinese-made goods as products of third countries such as Vietnam, which is an enforcement problem requiring Customs and Border Protection and importers to focus more closely on trade data; and the legal practice of shipping components to a third country for final assembly, which typically confers that country’s origin under US law. For high-risk national security products, he suggested rules should account for where components originate, not only where final assembly occurs. On outbound flows, he noted that the outbound investment rule begun under the Biden administration and expanded by the COINS Act remains narrowly focused on high-technology sectors, and raised the question of whether restrictions should extend to industrial-base sectors as well. Absent clearer law and regulation, he said, companies will continue making the decisions they see as economically rational.

On existing dependencies, Harrell urged an aggressive but realistic transition. Citing China’s 2025 curtailment of rare earth exports, he noted that dependencies accumulated over 15 to 20 years cannot be severed overnight without shutting down US manufacturing, and that alternative supply must scale up in parallel. He cited Department of Defense grants, loans, equity investments, and offtake agreements in neodymium mining and processing as a model pairing supply-side and demand-side incentives, and stressed that critical minerals cannot be secured by the United States alone, requiring work with Canada, Brazil, and prospective sites in Africa. Domestically, he identified three necessary components: R&D that develops superior alternatives rather than replicating Chinese processing methods — such as rare-earth-free magnet technology developed at the University of Minnesota — incentives for small and large manufacturers to scale production, and sustained education and workforce training investment to staff the facilities being built.