State Department Official Says U.S. Needs Domestic Investments in Supply Chains to Compete with China

At last week’s often heated Senate Foreign Relations Committee hearing, Wendy Sherman, Deputy Secretary of State, said if the U.S. wanted to compete seriously with China, it has to invest at home. That includes investing in reshoring, though she did not say that word in particular.

“Our way of life…and our value of the rules-based international order is being challenged,” Sherman said in response to a question by Sen. Marco Rubio (R-FL) about America’s ‘strategic vision’ to deal with China. Sherman said, “I believe we can meet that challenge by making sure we invest in our own country. We have to look at supply chains and make sure we either can produce things here in our own country, or we can do it with allies that ensure we have the resilience we need to meet this challenge.”

The hearing, titled Evaluating U.S. China Policy in the Era of Strategic Competition, took place on Feb. 9.  In her opening remarks, Sherman said that “the stakes could not be higher” in dealing with China. [Download Testimony]

Her comments came just days after the U.S. military shot down a China surveillance balloon over South Carolina’s coast.

Sherman, who shared the Senate’s witness stand with Ely Ratner, Assistant Secretary of Defense of Indo-Pacific Affairs, wrote in her testimony that the State Department’s strategy was to “Invest, Align, and Compete.”

“We are investing in the foundations of our strength on our shores, with funding from bills like the CHIPS and Science Act, the Bipartisan Infrastructure Law, and the Inflation Reduction Act. We are aligning with likeminded partners around the world to strengthen our shared interests and values – of democracy, openness, and fairness – and to address the challenges posed by the People’s Republic of China.” – Wendy Sherman, Deputy Secretary of State, Feb. 9, in hearing with the Senate Committee on Foreign Relations.

Sen. Bob Menendez (D-NJ), Committee Chairman, said in his opening remarks that the U.S. has to deal with the CCP with shows of strength. “Today, I released a detailed, 46-page Majority Staff Committee Report, outlining what needs to happen to realize the administration’s vision for the Indo-Pacific. But I’ll give you the short version. The China challenge affects every region in the world, and you’re going to have to do a better job of resourcing these efforts. That means more people in our embassies. It means modernizing the way we do business. It means offering an alternative to China,” he said.

Much of the hearing was about increasing diplomacy efforts where the U.S. was short in numbers – from embassies in Asia and Europe, to the United Nations. Menendez also spoke about working with allies to make sure U.S. restrictions on computer hardware exports were not being replaced by Japanese or German ones. But he did mention domestic manufacturing, if only in passing.

“These efforts to secure our supply chains and increase our domestic competitiveness are critical for American families’ bottom line,” Menendez said, warning, “When it comes to our global competition, right now, China has the upper hand.”

Ranking member Sen. Jim Risch (R-ID) said that China was the one issue in Washington that garnered support among Republicans and Democrats alike. “This is truly an American issue and a bipartisan issue,” he said.

Risch mostly spoke of Taiwan and on China support of the fentanyl trade in Mexico, which is starting to take a more center stage following the 2018-19 agreement between the CCP and the Trump administration on narcotics trafficking. He spoke about his ECON Act, a bill that was previously introduced, and said he and Menendez will likely include that in a new China bill in this new Congress.

Perhaps the most passionate speech came at the end of the hearing from Sen. Mitt Romney (R-UT). He, too, like Rubio, asked for a comprehensive strategy for tackling China. He said such a strategy would include “dozens upon dozens” of tactics related to economic measures and trade arrangements, to defense containment. He also mentioned domestic supply chains.

“We need to process raw materials here in the U.S. It drives me nuts watching China and we have no strategy. Everyone is off on different agendas,” Romney said. “We need a whole bunch of ideas and suggestions from outsiders that become the basis of our strategy going forward.”

He named outsiders like powerhouse think tanks Brookings Institution and the American Enterprise Institute.

“We need an advisory board on China made up of outsiders. I think the State Department needs to make that happen,” Romney said, though this is ripe for allowing in big lobby shops or advocacy groups that represent multinational importers. “We need the help of outside minds to come up with a series of options. Not doing so will lead us to a weaker leadership position,” Romney said.

Sherman agreed.

“We are working on those tactical areas, and it is incredibly time-consuming. The State Department does have a foreign policy affairs board, an international security board, and I will take back your idea that we have a China counsel, which we don’t have,” Sherman said.

Fentanyl came up a lot.

Sen. Bill Hagerty (R-TN) asked Sherman: “Is Communist China a state sponsor of fentanyl?”

To which Sherman responded, simply, “Yes.”

Hagerty said the topic needs to come up more in diplomatic talks with China. “I think the administration can do a better job holding China accountable,” he said.

On the subject of export controls, Sen. Chris Van Hollen (D-MD) asked if other countries were cooperating with the U.S. entity list restrictions.

Sherman said they were making “good progress” with allies, but add that it was “very painstaking work.”

The Biden administration is looking to make it even harder for U.S. tech companies to export hardware to China by increasing product types and banned entities. To date, however, critics in Washington – from Capitol Hill and from trade lawyer offices — have said that most of the licenses required to export to Entity List names are being granted, making the export restrictions somewhat porous.


CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.

The latest CPA news and updates, delivered every Friday.


Get the latest in CPA news, industry analysis, opinion, and updates from Team CPA.