"Examining the PRC's Strategic Port Investments in the Western Hemisphere and the Implications for Homeland Security, Part I"

1[House Hearing, 119 Congress]2[From the U.S. Government Publishing Office]34               EXAMINING THE PRC'S STRATEGIC PORT INVEST-5                 MENTS  IN  THE  WESTERN  HEMISPHERE  AND6                 THE IMPLICATIONS FOR  HOMELAND SECURITY,7                 PART I89=======================================================================1011                                HEARING1213                               before the1415                            SUBCOMMITTEE ON16                       TRANSPORTATION AND MARITIME17                                SECURITY1819                                 of the2021                     COMMITTEE ON HOMELAND SECURITY22                        HOUSE OF REPRESENTATIVES2324                    ONE HUNDRED NINETEENTH CONGRESS2526                             FIRST SESSION27                               __________2829                           FEBRUARY 11, 202530                               __________3132                            Serial No. 119-333                               __________3435       Printed for the use of the Committee on Homeland Security3637                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]3839        Available via the World Wide Web: http://www.govinfo.gov40                               __________4142                   U.S. GOVERNMENT PUBLISHING OFFICE434460-692 PDF                 WASHINGTON : 20254546                     COMMITTEE ON HOMELAND SECURITY4748                 Mark E. Green, MD, Tennessee, Chairman49Michael T. McCaul, Texas, Vice       Bennie G. Thompson, Mississippi,50  Chair                                Ranking Member51Clay Higgins, Louisiana              Eric Swalwell, California52Michael Guest, Mississippi           J. Luis Correa, California53Carlos A. Gimenez, Florida           Shri Thanedar, Michigan54August Pfluger, Texas                Seth Magaziner, Rhode Island55Andrew R. Garbarino, New York        Daniel S. Goldman, New York56Marjorie Taylor Greene, Georgia      Delia C. Ramirez, Illinois57Tony Gonzales, Texas                 Timothy M. Kennedy, New York58Morgan Luttrell, Texas               LaMonica McIver, New Jersey59Dale W. Strong, Alabama              Julie Johnson, Texas, Vice Ranking60Josh Brecheen, Oklahoma                Member61Elijah Crane, Arizona                Pablo Jose Hernandez, Puerto Rico62Andrew Ogles, Tennessee              Nellie Pou, New Jersey63Sheri Biggs, South Carolina          Sylvester Turner, Texas64Gabe Evans, Colorado                 Vacant65Ryan Mackenzie, Pennsylvania         Vacant66Brad Knott, North Carolina67                    Eric Heighberger, Staff Director68                  Hope Goins, Minority Staff Director69                       Sean Corcoran, Chief Clerk7071                                 ------7273          SUBCOMMITTEE ON TRANSPORTATION AND MARITIME SECURITY7475                  Carlos A. Gimenez, Florida, Chairman76Andrew R. Garbarino, New York        LaMonica McIver, New Jersey,77Elijah Crane, Arizona                  Ranking Member78Sheri Biggs, South Carolina          Timothy M. Kennedy, New York79Mark E. Green, MD, Tennessee (ex     Sylvester Turner, Texas80  officio)                           Bennie G. Thompson, Mississippi81                                       (ex officio)82             Roland Hernandez, Subcommittee Staff Director83           Alex Marston, Minority Subcommittee Staff Director8485                            C O N T E N T S8687                              ----------88                                                                   Page8990                               Statements9192The Honorable Carlos A. Gimenez, a Representative in Congress93  From the State of Florida, and Chairman, Subcommittee on94  Transportation and Maritime Security:95  Oral Statement.................................................     196  Prepared Statement.............................................     397The Honorable LaMonica McIver, a Representative in Congress From98  the State of New Jersey, and Ranking Member, Subcommittee on99  Transportation and Maritime Security:100  Oral Statement.................................................     5101  Prepared Statement.............................................     6102The Honorable Bennie G. Thompson, a Representative in Congress103  From the State of Mississippi, and Ranking Member, Committee on104  Homeland Security:105  Prepared Statement.............................................     8106107                               Witnesses108109Mr. Isaac B. Kardon, Ph.D., Senior Fellow for China Studies, Asia110  Program, Carnegie Endowment for International Peace, Adjunct111  Professor, Johns Hopkins SAIS:112  Oral Statement.................................................    10113  Prepared Statement.............................................    12114Mr. Matthew Kroenig, Vice President and Senior Director,115  Scowcroft Center for Strategy and Security, Atlantic Council116  and Professor of Government and Foreign Service, Georgetown117  University:118  Oral Statement.................................................    31119  Prepared Statement.............................................    33120Mr. Ryan C. Berg, Director, Americas Program, Center for121  Strategic and International Studies:122  Oral Statement.................................................    35123  Prepared Statement.............................................    37124Mr. Cary Davis, President & CEO, American Association of Port125  Authorities (AAPA):126  Oral Statement.................................................    44127  Prepared Statement.............................................    46128129                 EXAMINING THE PRC'S STRATEGIC PORT IN-130                  VESTMENTS IN THE  WESTERN  HEMISPHERE131                  AND  THE  IMPLICATIONS  FOR  HOMELAND132                  SECURITY, PART I133134                              ----------135136                       Tuesday, February 11, 2025137138             U.S. House of Representatives,139                    Committee on Homeland Security,140                        Subcommittee on Transportation and141                                         Maritime Security,142                                                    Washington, DC.143    The subcommittee met, pursuant to notice, at 10:06 a.m., in144Room 310, Cannon House Office Building, Hon. Carlos Gimenez145[Chairman of the subcommittee] presiding.146    Present: Representatives Gimenez, Garbarino, Crane, Biggs,147McIver, Kennedy, and Turner.148    Also present: Representatives Nunn, and Hernandez.149    Chairman Gimenez. The Committee on Homeland Security150Subcommittee on Transportation and Maritime Security will come151to order. Without objection, the Chair may declare the152subcommittee in recess at any point.153    Today's hearings will examine the People's Republic of154China's strategic investments in ports across the Western155Hemisphere, including the United States and near the Panama156Canal, and their broader implications for homeland security.157    Without objection, the gentleman from Iowa, Mr. Zach Nunn158and the gentleman from Puerto Rico, Mr. Pablo Jose Hernandez159are permitted to sit with the subcommittee and ask questions of160the witnesses.161    I now recognize myself for an opening statement. Good162morning. I want to welcome everyone to the first hearing of the163Subcommittee on Transportation and Maritime Security in the164119th Congress. As we begin this new Congress, it is only165fitting that we turn our attention to one of the most pressing166national security threats facing the United States today: the167People's Republic of China's growing presence in the Western168Hemisphere.169    In recent years, the PRC has steadily increased its170footprints in key maritime infrastructure across Latin America171and the Caribbean, gaining leverage over trade routes, and172extending its economic, political, and military influence in173our region.174    Today's hearing marks the beginning of a serious effort by175this subcommittee to assess the scope of Beijing's ambitions176and determine what steps must be taken to safeguard the177homeland.178    President Trump and senior officials in his administration179have rightly warned about the security risks posed by Beijing's180malign investments and particularly in ports near the Panama181Canal, which has long served as an essential artery for global182commerce and U.S. naval operations.183    Last week in his first foreign trip as Secretary of State,184Marco Rubio reinforced that warning during a visit to Panama185where he made clear that the PRC's presence near the canal186poses an unacceptable risk. These concerns are well-founded.187    Through state-owned enterprises such as China Merchants188Port Holdings, Hutchison Port Holdings, and China Ocean189Shipping Company, COSCO Shipping, the Chinese Communist party,190the CCP, has secured access to some of the most strategically191significant ports in our region.192    Nowhere is this more concerning than at Panama.193Approximately 14 percent of all U.S. seaborne trade moves194through the Panama Canal, with an even more significant 40195percent of U.S. container traffic transiting it annually.196    Hutchinson Ports, a subsidiary of Hutchison Port Holdings,197Limited, a Hong Kong-headquartered company with close ties to198the CCP, manages container terminals at 2 of the largest ports199adjacent to the canal. These container terminals are located at200the Port of Balboa on the Pacific side and the Port of201Cristobal on the Atlantic side.202    This gives Beijing a strategic position over one of the203world's most important waterways and provides the CCP with an204opportunity to exert influence over commercial shipping, gather205intelligence on American and allied vessel traffic, and206potentially restrict the mobility of our Navy in a time of207crisis.208    While Panama has recently announced an audit of Hutchinson209Ports, that is simply not enough. We don't need an audit. We210need action. The United States cannot and will not accept the211scenario where a foreign adversary, one that openly seeks to212undermine our global standing, controls infrastructure critical213to U.S. homeland security, military readiness, and economic214stability.215    For more than 2 centuries under the principles of the216Monroe Doctrine, the United States has been the primary217guarantor of stability and security in the Western Hemisphere,218ensuring that trade routes vital to our economic security219remain free from foreign adversarial dominance. Yet today, the220CCP is aggressively working to change that reality.221    However, Panama is only part of the larger picture. Across222the hemisphere, the PRC is securing port investment and223critical infrastructure agreements in countries such as Cuba,224Peru, Brazil, and Ecuador, among others.225    In communist Cuba, just 90 miles from my home district in226South Florida, the PRC has expanded its economic and signals227intelligence capabilities through facility development228agreements and telecommunications investments. This raises229serious concerns about Beijing's ability to conduct230surveillance against the United States from inside our own231backyard.232    In Peru, the PRC is transforming the Port of Chancay into a233major trade hub for its exports to South America. This is more234than an economic project. It strengthens the PRC's malign235economic influence and grip over regional trade and could allow236for dual-use capabilities to support future People Liberations237Army's Navy operations in the Pacific.238    The implications of these investments for U.S. homeland239security cannot be ignored.240    The PRC's expanding presence in Latin America has also241exacerbated the illicit flow of goods, including precursor242chemicals used to manufacture fentanyl. These chemicals fuel243drug production and trafficking networks run by the cartels to244send deadly narcotics into American communities.245    The CCP is complicit in this crisis, which has taken the246lives of thousands, no, not just thousands, hundreds of247thousands of Americans and overwhelmed law enforcement at our248Southwest Border.249    Alarmingly, these same PRC state-owned enterprises also250continue to operate in U.S. ports today, which poses grave251intelligence and security risk. A prime example is COSCO252Shipping which the Department of Defense recently placed on its253Section 1260H list of Chinese military companies due to its254ties to the PRC's military, intelligence, and security255apparatus.256    Less than a month ago, Federal authorities arrested 9257individuals for their role in a massive smuggling operation258that allegedly funneled nearly $200 million of counterfeit and259illicit goods from the PRC into the United States through the260Ports of Los Angeles and Long Beach.261    This is the kind of illicit activity that takes place when262we allow foreign adversaries, including those operating under263the direction of the CCP, to gain access to our Nation's264critical infrastructure.265    The message to our partners in the Western Hemisphere must266be clear. If you want to benefit from security cooperation and267economic partnership with the United States, you must distance268yourself from PRC state-owned enterprises. The CCP has no269rightful place in shaping the economic and security landscape270of our region.271    I want to thank our witnesses for appearing before the272subcommittee today. I look forward to a productive discussion273on how we can enhance America's security in response to the274PRC's increasing presence and influence in the Western275Hemisphere.276    [The statement of Chairman Gimenez follows:]277278                Statement of Chairman Carlos A. Gimenez279280                           February 11, 2025281282    Good morning. I want to welcome everyone to the first hearing of283the Subcommittee on Transportation and Maritime Security in the 119th284Congress.285    As we begin this new Congress, it is only fitting that we turn our286attention to one of the most pressing national security threats facing287the United States today--the People's Republic of China's (PRC) growing288presence in the Western Hemisphere.289    In recent years, the PRC has steadily increased its footprint in290key maritime infrastructure across Latin America and the Caribbean,291gaining leverage over trade routes and extending its economic,292political, and military influence in our region.293    Today's hearing marks the beginning of a serious effort by this294subcommittee to assess the scope of Beijing's ambitions and determine295what steps must be taken to safeguard the homeland.296    President Trump and senior officials in his administration have297rightly warned about the security risks posed by Beijing's malign298investments, particularly in ports near the Panama Canal, which has299long served as an essential artery for global commerce and U.S. naval300operations.301    Last week, in his first foreign trip as Secretary of State, Marco302Rubio reinforced that warning during a visit to Panama, where he made303clear that the PRC's presence near the canal poses an unacceptable304risk. These concerns are well-founded.305    Through state-owned enterprises such as China Merchants Port306Holdings, Hutchison Port Holdings, and China Ocean Shipping Company307(COSCO Shipping), the Chinese Communist Party (CCP) has secured access308to some of the most strategically significant ports in our region.309    Nowhere is this more concerning than in Panama. Approximately 14310percent of all U.S. seaborne trade moves through the Panama Canal, with311an even more significant 40 percent of U.S. container traffic312transiting it annually.313    Hutchinson Ports, a subsidiary of Hutchison Port Holdings Limited,314a Hong Kong-headquartered company with close ties to the CCP, manages315container terminals at two of the largest ports adjacent to the canal.316These container terminals are located at the Port of Balboa on the317Pacific side and the Port of Cristobal on the Atlantic side.318    This gives Beijing a strategic position over one of the world's319most important waterways and provides the CCP with the opportunity to320exert influence over commercial shipping, gather intelligence on321American and allied vessel traffic, and potentially restrict the322mobility of our Navy in a time of crises.323    And while Panama has recently announced an audit of Hutchison324Ports, that is simply not enough. We do not need an audit. We need325action.326    The United States cannot and will not accept a scenario where a327foreign adversary--one that openly seeks to undermine our global328standing--controls infrastructure critical to U.S. homeland security,329military readiness, and economic stability.330    For more than 2 centuries, under the principles of the Monroe331Doctrine, the United States has been the primary guarantor of stability332and security in the Western Hemisphere, ensuring that trade routes333vital to our economic security remain free from foreign adversarial334dominance.335    Yet today, the CCP is aggressively working to change that reality.336    However, Panama is only part of the larger picture. Across the337hemisphere, the PRC is securing port investments and critical338infrastructure agreements in countries such as Cuba, Peru, Brazil, and339Ecuador, among others.340    In Communist Cuba, just 90 miles from my home district in South341Florida, the PRC has expanded its economic and signals intelligence342capabilities through facility development agreements and343telecommunications investments. This raises serious concerns about344Beijing's ability to conduct surveillance against the United States345from inside our own backyard.346    In Peru, the PRC is transforming the Port of Chancay into a major347trade hub for its exports to South America. This is more than an348economic project. It strengthens the PRC's malign economic influence349and grip over regional trade and could allow for dual-use capabilities350that support future People's Liberation Army Navy operations in the351Pacific.352    The implications of these investments for U.S. homeland security353cannot be ignored.354    The PRC's expanding presence in Latin America has also exacerbated355the illicit flow of goods, including precursor chemicals used to356manufacture fentanyl.357    These chemicals fuel drug production and trafficking networks run358by the cartels that send deadly narcotics into American communities.359The CCP is complicit in this crisis, which has taken the lives of360thousands of Americans and overwhelmed law enforcement at our Southwest361Border.362    Alarmingly, these same PRC state-owned enterprises also continue to363operate in U.S. ports today, which poses grave intelligence and364security risks. A prime example is COSCO Shipping, which the Department365of Defense recently placed on its Section 1260H list of ``Chinese366military companies,'' due to its ties to the PRC's military,367intelligence, and security apparatus.368    Less than a month ago, Federal authorities arrested 9 individuals369for their role in a massive smuggling operation that allegedly funneled370nearly $200 million of counterfeit and illicit goods from the PRC into371the United States through the Ports of Los Angeles and Long Beach.372    This is the kind of illicit activity that takes place when we allow373foreign adversaries, including those operating under the direction of374the CCP, to gain access to our Nation's critical infrastructure.375    The message to our partners in the Western Hemisphere must be376clear. If you want to benefit from security cooperation and economic377partnership with the United States, you must distance yourselves from378PRC state-owned enterprises.379    The CCP has no rightful place in shaping the economic and security380landscape of our region.381    I want to thank our witnesses for appearing before the subcommittee382today.383    I look forward to a productive discussion on how we can enhance384America's security in response to the PRC's increasing presence and385influence in the Western Hemisphere.386387    Chairman Gimenez. I now recognize the Ranking Member, the388gentlewoman from New Jersey, Ms. McIver for her opening389statements.390    Mrs. McIver. Good morning. Thank you to our witnesses for391joining us today.392    Thank you to our Chairman Gimenez for holding today's393hearings.394    I am glad to serve as Ranking Member of this subcommittee395this Congress, and I look forward to working with all of my396colleagues to advance the security of our transportation and397maritime systems.398    Before I begin, I want to offer my condolences to the399friends and families of those recently took those to, excuse400me, to the friends and families of those lost in recent401aviation accidents here in Washington, DC, as well as402Philadelphia and Alaska. We must ensure travelers everywhere403can board planes and get to their destination safely and404securely.405    Now to the topic at hand, the People's Republic of China406has aggressively pursued investments in ports throughout the407Americas and across the globe. PRC aggression requires a408robust, coordinated response by the United States and our409allies.410    Investments by Chinese state-owned companies and terminal411leases at U.S. ports must continue to be reviewed carefully by412the Committee on Foreign Investments in the United States as413they have been to date. PRC investments in ports abroad must be414countered by U.S. foreign aid.415    However, scrutinizing PRC investments in our ports only416goes so far if we are at the same time opening the front gates417of our Government to Chinese influence. The PRC poses a threat418to U.S. national security through investments, not just in419ports but in all manner of foreign assets, including their top420puppet Elon Musk.421    Since being installed as the de facto president of the422United States, Musk has acted at every turn in the interest of423China and himself at the expense of American people. Musk has424deep ties to China. We do not know the full extent of those425ties because he refuses to follow public financial disclosure,426but we do know that Musk has received hundreds of millions of427dollars in loans from PRC-controlled banks to build factories428in Shanghai, which are central to his business and wealth.429    We know that Musk has repeatedly met with senior Chinese430officials and failed to disclose those meetings despite being431required to do so as a U.S. defense contractor. Musk's own DOGE432co-chair Vivek Ramaswamy has said of Musk, ``I have no reason433to think Elon won't jump like a circus monkey when Xi Jinping434calls in the hour of need.''435    Since inauguration day, Musk and his affiliates have436inserted themselves at multiple Government agencies and gained437access to Government systems containing America's most438sensitive personal data. Musk has also exported American's439personal data onto unsecured personal servers for unknown440reasons.441    One Government contractor responsible for contributing to442intelligence briefings for this Treasury Department called443DOGE's access to the Department's payment system, ``an444unprecedented insider threat risk.''445    If my colleagues were as concerned as they profess to be446about the PRC's access to sensitive U.S. critical447infrastructure and data, they would not be OK with handing448their constituents' information over to an unelected449billionaire whose true intentions are unknown.450    In addition, the Musk-Trump administration has attempted to451freeze grant spending, including disbursements for the Port452Security Grant Program which U.S. ports rely on to fund453critical security projects.454    To make matters worse, Musk and his underlings are killing455or trying to kill USAID, the agency responsible for providing456foreign aid. USAID's foreign investments are vital to advancing457U.S. interests abroad. In fact, USAID's investments are the458best tool the United States has to counter the PRC's influence459on the global stage in general and the PRC's foreign port460investments in particular.461    USAID provides these investments for less than 1 percent of462the Federal budget. Elon Musk's net worth has increased by far463more than the entire USAID's budget just since Election Day,464which just goes to show that he cares about his own personal465enrichment and not making the Government more efficient.466    Dismantling USAID is illegal. I am going to say that again.467Dismantling USAID is illegal as Congress has authorized,468funded, and mandated its foreign aid programs. But beyond that,469dismantling USAID is just plain dumb. At least it is dumb if470your goal is to advance U.S. interests, which may not be Musk's471goal.472    Removing U.S. foreign aid will create a soft power vacuum473that the PRC will happily fill. As one former USAID official474put it, and I quote, ``Halting foreign aid, even just475temporarily, will have obvious predictable results. Children476will die, our national security will erode, America's alliances477will suffer, U.S. partners will be at risk, and America's478enemies will rejoice. The Trump administration has just put479America last while handing a gift to our biggest adversaries,480notably China.''481    I agree with my colleagues across the aisle that our ports482need to be secure and that we need to counter the PRC's483influence in the United States and across the globe. I hope my484colleagues would open their eyes and see that this485administration's actions fly directly in the face of those486goals.487    I thank the witnesses again for joining us, and I yield488back.489    [The statement of Ranking Member McIver follows:]490491              Statement of Ranking Member LaMonica McIver492493                           February 11, 2025494495    I am glad to serve as Ranking Member of this subcommittee this496Congress, and I look forward to working with all my colleagues to497advance the security of our transportation and maritime systems.498    Before I begin, I want to offer my condolences to the friends and499families of those lost in recent aviation accidents here in Washington,500DC, as well as in Philadelphia and Alaska. We must ensure travelers501everywhere can board planes and get to their destinations safely and502securely.503    Now to the topic at hand. The People's Republic of China has504aggressively pursued investments in ports throughout the Americas and505across the globe.506    PRC aggression requires a robust, coordinated response by the507United States and our allies.508    Investments by Chinese state-owned companies in terminal leases at509U.S. ports must continue to be reviewed carefully by the Committee on510Foreign Investment in the United States, as they have been to date, and511PRC investments in ports abroad must be countered by U.S. foreign aid.512    However, scrutinizing PRC investments in our ports only goes so far513if we are, at the same time, opening the front gates of our Government514to Chinese influence.515    The PRC poses a threat to U.S. national security through their516investments not just in ports, but in all manner of foreign assets--517including their top puppet, Elon Musk.518    Since being installed as the de facto President of the United519States, Musk has acted at every turn in the interests of China and520himself, at the expense of the American people.521    Musk has deep ties to China. We do not know the full extent of522those ties because he refuses to file a public financial disclosure--523but we do know that Musk has received hundreds of millions of dollars524in loans from PRC-controlled banks to build factories in Shanghai,525which are central to his businesses and wealth.526    And we know that Musk has repeatedly met with senior Chinese527officials and failed to disclose those meetings, despite being required528to do so as a U.S. defense contractor.529    Musk's own former DOGE co-chair Vivek Ramaswamy has said of Musk,530``I have no reason to think Elon won't jump like a circus monkey when531Xi Jinping calls in the hour of need.''532    Since Inauguration Day, Musk and his unqualified cronies have533inserted themselves at multiple Government agencies and gained access534to Government systems containing Americans' most sensitive personal535data.536    Musk has also exported Americans' personal data onto unsecure537personal servers for unknown reasons.538    One Government contractor responsible for contributing to539intelligence briefings for the Treasury Department called DOGE's access540to the Department's payment system, ``an unprecedented insider threat541risk.''542    If my colleagues were as concerned as they profess to be about the543PRC's access to sensitive U.S. critical infrastructure and data, they544would not be OK with handing their constituents' information over to an545unelected billionaire whose true intentions are unknown.546    In addition, the Musk-Trump administration has attempted to freeze547grant spending, including disbursements for the Port Security Grant548Program, which U.S. ports rely on to fund critical security projects.549    To make matters worse, Musk and his underlings are trying to kill550USAID, the agency responsible for providing foreign aid. USAID's551foreign investments are vital to advancing U.S. interests abroad.552    In fact, USAID's investments are the best tool the United States553has to counter the PRC's influence on the global stage in general--and554the PRC's foreign port investments in particular.555    USAID provides these investments for less than 1 percent of the556Federal budget. Elon Musk's net worth has increased by far more than557the entire USAID budget just since Election Day--which just goes to558show that he cares about his own personal enrichment, not making the559Government more efficient.560    Dismantling USAID is illegal, as Congress has authorized, funded,561and mandated its foreign aid programs.562    But beyond that, dismantling USAID is just plain dumb. At least, it563is dumb if your goal is to advance U.S. interests--which may not be564Musk's goal. Removing U.S. foreign aid will create a ``soft power''565vacuum that the PRC will happily fill.566    As one former USAID official put it, ``Halting [foreign aid], even567just temporarily will have obvious, predictable results: Children will568die. Our national security will erode. America's alliances will suffer.569U.S. partners will be at risk. And America's enemies will rejoice . . .570The Trump administration has just put America last, while handing a571gift to our biggest adversaries, notably China.''572    I agree with my colleagues across the aisle that our ports need to573be secure, and that we need to counter the PRC's influence in the574United States and across the globe.575    I hope my colleagues will open their eyes and see that this576administration's actions fly directly in the face of those goals.577578    Chairman Gimenez. Thank you to the Ranking Member.579    Other Members of the committee are reminded that opening580statements may be submitted for the record.581    [The statement of Ranking Member Thompson follows:]582583             Statement of Ranking Member Bennie G. Thompson584585                           February 11, 2025586587    This hearing is only our committee's third this Congress, but I am588already beginning to sense a theme: the Republican Majority wants to589hold hearings on real problems, but is turning a blind eye to how the590Trump administration is making those problems much, much worse.591    Last week, Republicans convened a hearing on cybersecurity592workforce challenges, while trying to ignore the Trump administration's593brazen attacks on Federal workers.594    This week, Republicans are holding a hearing on the People's595Republic of China's growing international presence in the maritime596sector, while trying to ignore the Trump administration's brazen597attacks on U.S. foreign aid, which is essential to combatting the PRC's598influence around the world.599    This is like trying to mow the lawn while your house is on fire.600    The threats posed by the PRC to U.S. and international ports are601worthy of serious attention.602    The PRC has grown increasingly aggressive within the maritime603domain and currently owns or operates more than 40 ports in Mexico,604Central, and South America.605    Some of these are deepwater ports with wide-berth docks sufficient606for China's Navy to make port calls for logistics and refueling needs.607    The United States and its partners face tremendous challenges in608responding to the PRC's activities--which is even more challenging when609the current administration is undermining those efforts.610    On Inauguration Day, President Trump signed an Executive Order611pausing U.S. foreign aid.612    Since then, we have seen Elon Musk and his Department of Government613Efficiency minions attempt to shutter the U.S. Agency for International614Development.615    Stepping back from the world stage is not the way to counter616China's growing influence.617    In fact it will do exactly the opposite, opening the door for China618to fill the void the United States has left.619    As we seek to understand why the administration would take these620seemingly incomprehensible actions, we cannot ignore Elon Musk's ties621to China.622    Musk's various businesses are deeply entangled with the PRC.623    In 2019, Tesla opened the Shanghai Super Factory, built using loans624from PRC state-owned banks.625    The PRC has given Tesla special tax breaks and other benefits.626    Ever since Musk established business ties with the PRC, he has627acted in China's best interests.628    During the December 2024 Government funding negotiations, Musk629inserted himself at the last minute to urge Republicans to reject the630bill they had negotiated.631    The bill would have prohibited or required notification of overseas632transactions involving certain Chinese services, as well as an expanded633review of Chinese real estate purchases in the United States.634    Republicans followed Musk's orders, and the final version of the635bill dropped those provisions.636    In addition, the Department of Defense has been investigating Musk637and SpaceX for failing to disclose meetings with Chinese and Russian638foreign leaders, as required by law.639    Now, we see Musk deconstructing the Federal Government from the640inside, in ways the PRC will easily exploit.641    The fox is guarding the henhouse, and we do not know his true642intentions.643    I hope the Republican Majority will stop willfully ignoring how the644administration is exacerbating the problems for which they claim to645have such grave concerns.646647    Chairman Gimenez. I am pleased to have a distinguished648panel of witnesses before us today on this critical topic. I649ask that our witnesses to please rise and raise their right650hand. Do you solemnly swear that the testimony you will give651before the Committee on Homeland Security of the U.S. House of652Representatives will be the truth, the whole truth, and nothing653but the truth, so help you God?654    Let the record reflect that the witnesses have answered in655the affirmative. Thank you and please have a seat.656    [Witnesses sworn.]657    Chairman Gimenez. I would now like to formally introduce658our witnesses. Dr. Isaac Kardon is a senior fellow for China659Studies at Carnegie Endowment for International Peace and an660adjunct professor at Johns Hopkins School of Advanced661International Studies. Previously, he was an assistant662professor at the U.S. Naval War Colleges China Maritime Studies663Institute.664    Dr. Kardon specializes in China's maritime power, including665its global port development, overseas military basing, and the666international law of the sea. He holds a Ph.D. in government667from Cornell University and an MPhil in modern Chinese studies668from Oxford and a BA in history from Dartmouth.669    Dr. Matthew Kroenig is vice president and senior director670of the Scowcroft Center for Strategy and Security at the671Atlantic Council. He specializes in U.S. national security672strategy, strategic competition with China and Russia, and673nuclear deterrence.674    Dr. Koenig currently serves as tenured professor at675Georgetown University, and he is also a commissioner on the676Congressional Commission on the Strategic Posture of the United677States. Previously, he served in the Department of Defense and678the intelligence community under the Bush, Obama, and Trump679administrations. He holds a Ph.D. and an MA in political680science from the University of California Berkeley and is a681life member of the Council on Foreign Relations.682    Dr. Ryan Berg is director of the Americas Program and head683of the Future of Venezuela's Initiative at the Center for684Strategic and International Studies. Dr. Berg specializes in685U.S.-Latin American relations, strategic competition, defense686policy, and transnational organized crime.687    Previously, he was a research fellow at the American688Enterprise Institute and a visiting fellow at Oxford's Changing689Character of War Program. He holds a Ph.D., an MPhil in690political science and an MSC in global governance from Oxford,691as well as a BA in government and theology from Georgetown.692    Dr. Cary Davis is the president and chief executive officer693of the American Association of Port Authorities where he also694serves as general counsel.695    Prior to the AAPA, Mr. Davis served in the Federal696Government as a Presidential and Congressional appointee for697international trade and security. He holds a J.D. and a698Master's degree from the University of Pennsylvania and a B.S.699from the University of Pittsburgh.700    I thank each of our distinguished witnesses for being here701today.702    I now recognize Dr. Kardon for 5 minutes to summarize his703opening statement.704705     STATEMENT OF ISAAC B. KARDON, PH.D., SENIOR FELLOW706      FOR CHINA STUDIES, ASIA PROGRAM,  CARNEGIE ENDOW-707      MENT FOR INTERNATIONAL PEACE,  ADJUNCT PROFESSOR,708      JOHNS HOPKINS SAIS709710    Mr. Kardon. Chairman Gimenez, Ranking Member McIver, and711Members of the subcommittee, thank you for this opportunity to712testify on Chinese firms' strategic port investments in the713Western Hemisphere and their implications for homeland714security.715    Chinese companies have invested in port terminals in 7716countries in our hemisphere and include 5 terminals in U.S.717ports. Two Chinese state-owned enterprises, COSCO and China718Merchants, along with the private conglomerate Hong Kong-based719CK Hutchison Holdings, are the lead Chinese partner in each of720these investments.721    Compared to other regions, Chinese firms maintain a722relatively modest presence in the Americas with investments in72315 ports of 95 total, which represents 16 percent of their724overall global port investments.725    In the United States, Chinese firms hold minority stakes in726terminals at the Ports of Los Angeles, Seattle, Houston, and727Miami. At Long Beach, COSCO holds a 51 percent stake at Pier J.728These positions are generally structured as joint ventures with729American firms, which are generally the lead operators. Beyond730our borders, Chinese companies made particularly strategic731investments in Panama, Peru, and Brazil.732    Turning to homeland security implications, I assessed 2733primary areas of valid concern. First, the potential for734Chinese military use of these facilities to project power in735the hemisphere, and second, the exposure of critical maritime736infrastructure to certain physical and digital vulnerabilities.737    On the military front, Chinese naval presence in our738hemisphere is relatively modest. The People's Liberation Army739Navy has conducted only 39 port calls in the Americas over the740past 27 years. That's out of a total of 413, so about 9741percent, with no reported calls since the year 2018.742    While Chinese-operated ports can and do support limited743military operations, observed especially in their regular744missions in the Indian Ocean region, the correlation of forces745in this hemisphere overwhelmingly favors the United States.746    For the PLA to mount a direct challenge to America's747exclusive role in hemispheric security would be a risky and748counterproductive deviation from Beijing's clear strategic749imperatives. These will remain anchored in the western Pacific750and focused on controlling Taiwan for the foreseeable future.751    The more pressing concerns involve vulnerabilities752introduced by Chinese-made equipment and software embedded in753port systems. Even facilities not owned or operated by Chinese754firms often rely on PRC-made technologies--for example, ship-755to-shore cranes.756    Under Beijing's highly-acquisitive data governance regime757and comparatively high levels of control over PRC firms, these758systems enable intelligence collection and surveillance and may759cause delay or disruption to the critical operations of U.S.760maritime transport systems.761    Four recommendations follow from these findings. First,762while the presence of Chinese investments and equipment in U.S.763ports present some material risks, indiscriminate force764divestiture would do more harm than good. The focus should be765on implementing stringent and mandatory cybersecurity and other766security screening and developing viable domestic alternatives767to technologies and services currently dominated by PRC firms.768U.S. terminal concessions are less problematic from a national769security standpoint but should also be scrutinized rigorously.770    Second, the United States must work closely with the771government of Panama to protect our vital national security772interests that are concentrated at the Panama Canal. This773should include helping attract private capital to take over any774rescinded concessions and to expand and upgrade existing775facilities.776    Third, rather than trying to symmetrically match China's777port investments, we should leverage our extensive network of778capable maritime partners in Asia and Europe in particular to779compete collectively.780    Finally, Congress should prioritize legislation like the781SHIPS for America bill proposed in the last Congress to782coordinate our national maritime strategy, including creating a783maritime security advisor position to improve strategic784planning and decision making that integrates economic and785national security concerns.786    Challenges posed by China's port investments in the787hemisphere are real but manageable with proper attention and788coordinated response.789    Thank you for the opportunity to testify and I'll look790forward to your questions.791    [The prepared statement of Mr. Kardon follows:]792793    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]794795    Chairman Gimenez. Thank you, Dr. Kardon.796    I now recognize Dr. Kroenig for 5 minutes to summarize his797opening statement.798799       STATEMENT OF MATTHEW KROENIG, VICE PRESIDENT AND800        SENIOR DIRECTOR,  SCOWCROFT CENTER FOR STRATEGY801        AND SECURITY, ATLANTIC COUNCIL AND PROFESSOR OF802        GOVERNMENT AND FOREIGN SERVICE, GEORGETOWN UNI-803        VERSITY804805    Mr. Kroenig. Chairman Gimenez, Ranking Member McIver,806distinguished Members of the committee, thank you for the807opportunity to testify on the important topic of Chinese808strategic port investments in the Western Hemisphere and the809implications for U.S. homeland security.810    I want to assist your work by sharing insights gleaned from811my more than 2 decades of experience working on U.S. national812security at the Central Intelligence Agency, Department of813Defense, the Congressional Commission on the Strategic Posture814of the United States, and now as a scholar at Georgetown815University and a vice president at the Atlantic Council.816    My message today is simple. China's port investments in the817Western Hemisphere pose a serious national security threat to818the United States and its allies. Washington and regional819states should work together to decouple from Chinese820investments in ports and other areas critical to national821security.822    China poses the greatest contemporary threat to U.S.823national security. It's a comprehensive challenge with824economic, technological, diplomatic, ideological, and military825dimensions. Ultimately, the rivalry concerns the future of826global order.827    China employees overseas infrastructure investments,828including in the Western Hemisphere, as part of its grand829strategy. Countries in the Western Hemisphere are often830attracted to China's infrastructure investments but they come831at a cost. Through its investments, China cements access to832resources, captures elites, gains leverage over governments,833shifts national policies in its favor, and undermines834democratic norms in transparency and environmental standards.835    China's investments in ports, including in Peru and Panama,836pose a number of threats to U.S. homeland security. Chinese-837operated ports are used to facilitate the shipment of fentanyl838precursors to the United States. China exploits the presence of839technology and access to data for an intelligence advantage.840    China could restrict or block access to ports threatening841American trade and economic well-being. In the event of a842crisis or war, China could hinder the passage of American naval843vessels undermining American war plans.844    China could also use deep water ports to host naval845vessels, enabling the projection of military power into the846Western Hemisphere. As Secretary of State Marco Rubio recently847and correctly stated, ``The status quo is unacceptable.''848    There are a number of steps the United States should take849to counter Chinese port investments in the Western Hemisphere850to protect U.S. and allied security. The United States should851encourage countries in the Western Hemisphere to adopt a852derisking approach to China.853    Regional governments do not need to choose between the854United States and China. They can continue trade with China in855non-sensitive areas such as agriculture, but U.S. allies and856partners should pursue a hard decoupling with China in areas of857sensitive national security concern such as telecommunications,858advanced technology, ground satellite stations, surveillance859systems, critical minerals, and critical infrastructure,860including ports.861    Donald Trump, President Trump has said of the Panama Canal,862``We gave it to Panama and we're taking it back.'' I applaud863the Panamanian government's subsequent decision to forego864renewal of their participation in China's Belt and Road865Initiative, and Panama should use its current audit of866operators in the Panama Canal area as an opportunity to sever867the contracts with Chinese companies and to rebid the contract868to U.S. or allied companies that will better ensure American869and Panamanian interest.870    Encouraging regional countries to derisk from China will871often be doing these countries a favor. Many Latin American872countries entered into agreements with China years ago under873previous governments and different geopolitical conditions.874    Today these same countries understand that undue Chinese875influence in sensitive sectors is not in their interest, but876they do not have the ability to stand up to China on their own,877pointing to the United States as the bad cop, and help these878countries take necessary steps that would be difficult to take879on their own.880    Washington cannot, however, expect regional countries to881trade something for nothing. The United States must provide882credible and affordable alternatives to Chinese infrastructure883investments. To do this, the United States has a number of884advantages. We have a number of ways to incentivize our vibrant885private sector to invest in the region.886    The United States has a robust network of allies and887partners we can coordinate, European, Japanese, Australian, and888South Korean efforts to provide aid and alternatives in the889region.890    Third, the United States and its allies can compete on891quality when it comes to environmental standards, labor892standards, technical know-how, and so forth.893    Finally, as the Trump administration looks to increase894defense spending and debates regional priorities, it should895boost the budget of U.S. Southern Command and increase SOUTHCOM896training and exercises with regional partners.897    Appended to this statement is a copy of a strategy to898counter malign Chinese and Russian influence in Latin America899and the Caribbean, an Atlantic Council report I co-authored900last year that explores these issues in greater detail and901provides actionable recommendations.902    I'm honored that the Committee on Homeland Security has903invited me to share my views on these challenges, and I look904forward to taking your questions.905    [The prepared statement of Dr. Kroenig follows:]906907                 Prepared Statement of Matthew Kroenig908909                           February 11, 2025910911    Chairman Gimenez, Ranking Member McIver, distinguished Members of912the committee, thank you for the opportunity to testify on the913important topic of Chinese strategic port investments in the Western914Hemisphere and the implications for U.S. homeland security.915    I want to assist your work by sharing insights gleaned from my more916than 2 decades of experience working on U.S. national security policy917at the Central Intelligence Agency, Department of Defense, the918Congressional Commission on the Strategic Posture of the United States,919and now as a scholar at Georgetown University, and a vice president at920the Atlantic Council.921    My message today is simple: China's port investments in the Western922Hemisphere pose a serious national security threat to the United States923and its allies and partners in the region. Washington and regional924states should work together to decouple from Chinese investments in925ports and other areas critical to national security.926    China poses the greatest contemporary threat to U.S. national927security. It is a comprehensive challenge with economic, technological,928diplomatic, ideological, and military dimensions. Ultimately, the929rivalry concerns the leadership of global order.930    China employs overseas infrastructure investments, including in the931Western Hemisphere, as part of its grand strategy. Countries in the932Western Hemisphere are often attracted to China's infrastructure933investments, but they come at a cost. Through its investments, China934cements access to resources, captures elites, gains leverage over935governments, shifts national policies in its favor, and undermines936democratic norms, and transparency and environmental standards.937    China's investments in ports, including in Peru and Panama, pose a938number of threats to U.S. homeland security. Chinese-operated ports are939used to facilitate the shipment of fentanyl precursors to the United940States. China exploits the presence of technology and access to data941for an intelligence advantage. China could restrict or block access to942ports, threatening American trade and economic well-being. In the event943of a crisis or war, China could hinder the passage of American naval944vessels, undermining American war plans. China could also use deep945water ports to host People's Liberation Army Navy vessels, enabling the946projection of military power into the Western Hemisphere.947    As Secretary of State Marco Rubio correctly stated, this status quo948is unacceptable. There are a number of steps the United States should949take to counter Chinese port investments in the Western Hemisphere and950protect U.S. and allied security, freedom, and prosperity.951    The United States should encourage countries in the Western952Hemisphere to adopt a de-risking approach to China. Regional953governments do not need to choose between the United States and China.954They can continue lucrative trade with China in non-sensitive domains,955such as agriculture. But U.S. allies and partners should pursue a hard956decoupling with China in areas of sensitive national security concern,957such as: telecommunications, advanced technology, ground satellite958stations, surveillance systems, military and intelligence cooperation,959critical minerals, and critical infrastructure, including ports.960    President Donald J. Trump said, ``China is operating the Panama961Canal and we didn't give it to China, we gave it to Panama, and we're962taking it back.''963    I applaud the Panamanian government's subsequent decision to forgo964renewal of their participation in China's Belt and Road Initiative965(BRI). Panama should use its current audit of operators in the Panama966Canal area as an opportunity to sever the contracts with Chinese967companies and to re-bid the contract to U.S. or allied companies that968will better ensure American and Panamanian interests.969    Pressuring regional countries to de-risk from China will often be970doing these countries a favor. Many Latin American countries entered971into agreements with China years ago under previous governments, in a972different geopolitical environment. Today, these same countries now973understand that undue Chinese influence in sensitive sectors is not in974their interest, but they do not have the ability to stand up to China975on their own. Pointing to American pressure, as the ``bad cop,'' can976help these countries take necessary steps that would be difficult to977take on their own.978    Washington cannot, however, expect regional countries to trade979something for nothing.980    The United States must provide credible and affordable alternatives981to Chinese infrastructure investments. The U.S. Government cannot982compete with Chinese-subsidized infrastructure investments on price or983scale, but it has a number of other advantages.984    First, it should incentivize its vibrant private sector to invest985in the region. Institutions like the International Development Finance986Corporation and the Export-Import Bank should continue their987transformation into instruments to advance American interests in this988new era of great power confrontation.989    Second, the United States should leverage its global network of990allies and partners for great power competition in the Global South.991The European Union and U.S. allies in the Indo-Pacific, such as992Australia, Japan, and South Korea, have world-class technology993companies, extensive trade relationships in the Western Hemisphere, and994significant foreign aid programs. To be most effective, however, the995various activities should be brought together in a coordinated fashion,996guided by Washington.997    Third, the United States and its allies can compete on quality.998While Chinese investments are often economically attractive, they come999with strings attached. The United States and its free world allies can1000outcompete China on free and fair-trade practices, transparency, anti-1001corruption, rule of law, technical know-how, and high labor and1002environmental standards.1003    Finally, as the Trump administration looks to increase defense1004spending and debates regional priorities, it should boost the budget of1005U.S. Southern Command and increase SOUTHCOM training and exercises with1006regional partners. In the worst-case scenarios, SOUTHCOM must be1007prepared to step in and secure access to ports and open sea lines of1008communication.1009    Appended to this statement is a copy of ``A Strategy to Counter1010Malign Chinese and Russian Influence in Latin America and the1011Caribbean,'' an Atlantic Council report I co-authored last year that1012explores these issues in greater detail and provides actionable1013recommendations.*1014---------------------------------------------------------------------------1015    * The report can be found at https://www.atlanticcouncil.org/1016content-series/atlantic-council-strategy-paper-series/a-strategy-to-1017counter-malign-chinese-and-russian-influence-in-latin-america-and-the-1018caribbean/.1019---------------------------------------------------------------------------1020    I am honored that the Committee on Homeland Security has invited me1021to share my views on these challenges, and I look forward to taking1022your questions.10231024    Chairman Gimenez. Thank you, Dr. Kroenig.1025    I now recognize Dr. Berg for 5 minutes to summarize his1026opening statements.10271028        STATEMENT OF RYAN C. BERG, DIRECTOR, AMERICAS PRO-1029         GRAM,  CENTER  FOR  STRATEGIC  AND  INTERNATIONAL1030         STUDIES10311032    Mr. Berg. Chairman Gimenez, Ranking Member McIver,1033distinguished Members of the subcommittee, I'm honored to share1034my views with you this morning on this critical topic.1035    Concern about the People's Republic of China advancing in1036the construction, operation, and even the ownership of ports is1037nothing new. What has changed is the geopolitical and economic1038contexts.1039    The United States has shaken its post-Cold War stupor. The1040United States is no longer asleep at the switch as strategic1041rivals set down roots in our shared neighborhood. And the1042United States is once again exercising its competitive muscles1043in geographies unaccustomed to this level of U.S. attention.1044    According to a recent analysis by the Council on Foreign1045Relations, as well as a China activities dashboard maintained1046by the Florida International University, almost 130 ports1047globally have some degree of PRC ownership or operation.1048    One distinctive feature stands out. More than half of1049China's ports sit on major shipping lanes and strategic choke1050points. In the Western Hemisphere this has meant port terminals1051in at least 3 locations in Mexico, the Hutchinson Ports at the1052strategic approaches of the Panama Canal, the recently-opened1053mega port in Chancay Peru, plans for a deep water port in St.1054John's Harbor in Antigua, a 90 percent stake in the Port of1055Paranagua for China Merchants Port Holding Company in Brazil, a1056100 percent stake in the Kingston Freeport Terminal for the1057same company, and designs on a port near Punta Arenas in Chile1058and near the Drake Passage in Argentina.1059    The PRC's military-civil fusion strategy creates risks for1060both soft commercial espionage and hard security risks in a1061potential conflict situation. Beijing's national security law1062amounts to a state-mandated espionage while SOUTHCOM has1063highlighted several hard security risks and posture statements1064to this very Congress, radar and GPS jamming, physical1065blockades, and even containerized weapon systems.1066    Given the importance of ports in general, the activities1067and global reach of transnational criminal organizations, there1068is also emerging evidence that Chinese-operated and -owned1069ports could also be catalyzers of TCO group activities in1070illicit markets given the PRC's reliance on opacity as a key1071operating principle.1072    However, not all Chinese ports are the same. China has1073hundreds of thousands of state-owned enterprises and the ones1074that collaborate with the PLA are mostly well-known and many1075are, in fact, blacklisted by our Government. Those SOEs should1076be the subject of extra focus and scrutiny,1077    Mr. Chairman, in my remaining time I'd like to move to some1078policy recommendations. First, I think we need to create a1079methodology for a spectrum of concern regarding Chinese-owned1080and -operated ports. Four criteria would be basic starting1081points for me.1082    First, the location of the port both in terms of the1083proximity to the U.S. homeland and its position vis-a-vis key1084maritime trade routes; second, the mode of cooperation between1085China and Latin American host country; third, the relationship1086between the host government and Beijing; and fourth, the1087criticality of a particular port to global trade.1088    The second recommendation, I think we need to consider1089leveraging the DFC and other multilateral financial1090institutions to launch a port buyback program in cases where1091the PRC is the owner. In the cases where the PRC is the port1092operator, these institutions may consider supporting a program1093to help countries terminate agreements early and entice more1094transparent operators to bid on concessions that become1095available.1096    The United States should also stand up a program to reduce1097Chinese equipment, both software and hardware, at Western1098Hemisphere ports. As I understand it, current U.S. law does not1099permit the systems to foreign ports to extricate Huawei1100equipment, for example, or ZPMC cranes.1101    Third, the United States must find a way to make a better1102offer in these select and critical areas. Simply put, we need1103to up our game in commercial diplomacy. We should grow our1104commercial service by 2 to 3 times by recruiting people with a1105decade or more of private-sector experience, including with1106cross-cultural skills in the regions where they'd be working.1107We should bring these individuals in to embassies via direct1108non-foreign service officer test and hiring pipeline. We can1109use IEFA, I believe, to create the recruiting and on-boarding1110process.1111    We should also establish a global Belt and Road task force1112as part of the State Department's China House to identify where1113the PRC is bidding on infrastructure projects, critical1114minerals projects, ICT networks, and so on. We must make1115commercial diplomacy a metric for success in every global south1116Ambassador's routine evaluations.1117    Fourth, I think we need to maintain overhead imagery1118collection programs on select PRC ports. The United States1119should maintain strong overhead imagery collection on Chinese-1120owned and -operated ports in LAC to ensure they do not expand1121or quietly but fundamentally alter their nature. This happened1122in the United Arab Emirates when we caught the Chinese1123expanding to accommodate military vessels, and the PRC was1124forced to cease construction.1125    I think with enthusiasm for China's BRI waning in recent1126years and following Panama's courageous decision to end its1127participation in the BRI, the United States has opportunities1128to advance port infrastructure security.1129    With that, Mr. Chairman, I yield and look forward to the1130committee's questions.1131    [The prepared statement of Dr. Berg follows:]11321133                   Prepared Statement of Ryan C. Berg11341135                       Tuesday, February 11, 202511361137    Chairman Gimenez, Ranking Member McIver, and distinguished Members1138of the subcommittee, I am honored to share my views with you on this1139important topic. CSIS does not take policy positions, so the views1140represented in this testimony are my own and not those of my employer.1141In my testimony, I would like to reflect on the soft and hard security1142risks of Chinese port activity in the Western Hemisphere, the way PRC1143ports are rewiring the region's trade routes, the nexus between Chinese1144ports and transnational organized crime, and how we might develop a1145methodology for a spectrum of concern regarding Chinese port activity1146in Latin America.11471148``[T]he truth of the matter is that the People's Republic of China is1149rapidly filling the vacuum created by the departure of American1150military forces from the isthmus [of Panama] . . . Their presence adds1151to the danger of using the Colon Free Zone to purchase restricted1152technology with dual civilian-military use.''--Dr. Tomas Cabal,1153December 7, 1999 at a hearing of the U.S. House Subcommittee on1154Domestic and International Monetary Policy.\1\1155---------------------------------------------------------------------------1156    \1\ https://www.washingtonpost.com/wp-srv/WPcap/1999-12/08/008r-1157120899-idx.html.11581159    Concern about the Peoples Republic of China (PRC) advancing in the1160construction, operation, and even ownership of ports is nothing new.1161What has changed is the geopolitical and economic contexts. The United1162States has shaken its post-Cold War stupor. Policy makers are no longer1163asleep at the switch as strategic rivals set down roots in our shared1164neighborhood. And the United States is once again exercising its1165competitive impulses in geographies unaccustomed to this level of U.S.1166attention.1167    The rise of Xi Jinping changed everything for competition with the1168PRC in the Western Hemisphere. Not only does Xi tend to securitize all1169aspects of the U.S.-China competition, but he also hardened the1170consensus against the United States as he played to nationalism1171domestically. Two thousand fifteen was a watershed year for1172competition, as it saw the PRC pass its infamous National Security Law.1173In 2020, the PRC absorbed Hong Kong and passed an analogous 2020 Hong1174Kong Security Law. This ``changed the equation for Chinese companies1175abroad,'' according to a former senior official on the Trump1176administration's national security council for the Western1177Hemisphere.\2\ In the best of times, distinctions between private and1178state-owned firms are matters of degree in a communist regime; however,1179these laws require that Chinese and Hong Kong companies gather1180information on foreign entities and provide that data upon request to1181the Chinese Communist Party--tantamount to state-mandated espionage.1182---------------------------------------------------------------------------1183    \2\ https://www.politico.com/news/2025/02/01/panama-trump-1184confrontation-war-00201759.1185---------------------------------------------------------------------------1186    Within this context, growing PRC involvement in maritime ports in1187Latin America and the Caribbean (LAC) presents a serious challenge to1188U.S. maritime supremacy, freedom of navigation, data security, and1189supply chain security.11901191                           regional panorama11921193    According to a recent analysis by the Council on Foreign Relations,1194almost 130 ports globally have some degree of PRC ownership.\3\ Between11952010 and 2019, Chinese companies ploughed $11 billion into overseas1196ports.\4\ In roughly the same time period, the Chinese state subsidized1197its shipping companies to the tune of over $130 billion.\5\ Almost half1198of the leading container ports outside of China have some Chinese1199ownership or operations.\6\ One distinctive feature: more than half of1200China's ports tend to sit on major shipping lanes and strategic1201chokepoints.\7\1202---------------------------------------------------------------------------1203    \3\ https://www.cfr.org/tracker/china-overseas-ports.1204    \4\ https://chinapower.csis.org/china-ports-connectivity/1205#:?:text=Learn%20more%20about%20-1206the%20BRI,ports%20between%202010%20and%202019.1207    \5\ https://www.csis.org/analysis/hidden-harbors-chinas-state-1208backed-shipping-industry.1209    \6\ https://www.foreignaffairs.com/united-states/chinas-port-power.1210    \7\ https://muse.jhu.edu/pub/6/article/855437/pdf.1211---------------------------------------------------------------------------1212    In the Western Hemisphere, this has meant port terminals in at1213least 3 locations in Mexico; the Hutchison Ports in the Panama Canal; a1214recently-opened megaport in Chancay, Peru; plans for a deepwater port1215in St. John's Harbor, Antigua, and Barbuda; and, designs on a port near1216Punta Arenas in Chile and near the Drake Passage in Argentina.1217    Chinese state-owned enterprises and black-listed companies often1218lead the way in construction, operation, and ownership of maritime1219ports in LAC. For instance, COSCO Shipping is a state-owned shipping1220and services provider that has a 60% ownership stake in the Chancay1221megaport in Peru. COSCO will also be the exclusive operator of the1222port, thanks to changes it forced into Peruvian law during port1223construction. When fully operational, Chancay's 4 berths and massive1224capacity will make it the largest port by 20-foot equivalent units1225(TEUs) in Latin America.\8\1226---------------------------------------------------------------------------1227    \8\ https://globalconnectivities.com/2024/06/the-port-of-chancay-1228at-the-centre-of-sino-peruvian-relations/.1229---------------------------------------------------------------------------1230    Further south and on the Atlantic Coast, PRC state-owned entity1231China Merchants Port Holding Company owns 90% of the Port of Paranagua,1232the second-largest port in terms of handling, and also operates it.\9\1233In the Panama Canal, Panama Ports Company, a subsidiary of Hong Kong-1234based company Hutchison Holdings, has operated 2 ports at the strategic1235approaches of the canal--Balboa on the Pacific side and Cristobal on1236the Atlantic side--since 1997. Within the Caribbean, China Merchants1237Port has also acquired a 100% stake in the Kingston Freeport Terminal1238while the PRC has made steady advances on the island of Antigua.1239Finally, last November, the opening of the new megaport of Chancay in1240Peru drew attention to the PRC's advance in the commercial and1241potential military domains in South America.1242---------------------------------------------------------------------------1243    \9\ https://www.reuters.com/article/world/europe/china-merchants-1244buys-control-of-brazils-most-profitable-port-idUSKCN1BF03B/.1245---------------------------------------------------------------------------1246                     military-civil fusion strategy12471248    Beyond the 2015 and 2020 National Security Laws, the strategic and1249security concerns of Chinese activity in LAC ports has been exacerbated1250by China's military-civil fushion strategy. At its base, military-civil1251fushion seeks to build the PRC into an economic, technological, and1252military superpower through blending and integrating military and1253civil, defense, and commercial, enterprises. In other words, the PRC1254has tied its economic development and increasing engagement with the1255outside world to its military modernization efforts.\10\ Military-civil1256fushion has witnessed the PRC leverage talent in research and1257development with military goals.1258---------------------------------------------------------------------------1259    \10\ https://www.csis.org/blogs/trustee-china-hand/chinas-evolving-1260conception-civil-military-collaboration.1261---------------------------------------------------------------------------1262    First referenced as a guiding principle in former Chinese leader Hu1263Jintao's report to the 17th Party Congress in 2007, military-civil1264fushion has evolved from an integration approach to an official PRC1265military strategy in 2015.\11\ As a major state strategy, military-1266civil fushion sits alongside other key drivers, such as the Made in1267China 2025 and Next Generation Artificial Intelligence plans. The1268United States Department of State says that military-civil fushion is1269applied most vigorously to dual-use and advanced technologies, such as1270quantum computing, big data, semiconductors, 5G, advanced nuclear and1271aerospace technologies, and artificial intelligence.\12\1272---------------------------------------------------------------------------1273    \11\ https://thediplomat.com/2017/04/chinas-answer-to-the-us-1274military-industrial-complex/.1275    \12\ https://2017-2021.state.gov/military-civil-fusion/.1276---------------------------------------------------------------------------1277    Beijing has been known to deploy a range of methods to advance1278military-civil fushion, including talent recruitment programs, forced1279technology transfer, intelligence gathering, and theft. In 2021, the1280United States Department of Defense created a list of ``Chinese1281military companies'' operating directly or indirectly in the United1282States, which was last updated in early January with 134 companies.\13\1283---------------------------------------------------------------------------1284    \13\ https://www.bloomberg.com/news/articles/2025-01-07/us-1285blacklist-of-china-s-tech-giants-risks-even-faster-decoupling.1286---------------------------------------------------------------------------1287    Furthermore, China's military-civil fushion strategy provides1288Beijing with an extensive logistical network to project its naval power1289globally.\14\ PRC-operated ports exemplify China's goal of leveraging1290economic investment as an anchor to support military engagement. The1291PRC's dual-use facilities can support both commercial and military1292operations, from enabling military logistics and intelligence gathering1293in peacetime, to potentially facilitating naval operations in1294wartime.\15\1295---------------------------------------------------------------------------1296    \14\ https://dialogo-americas.com/articles/cosco-shipping-hidden-1297force-behind-chinas-navy/.1298    \15\ https://www.voanews.com/a/us-analysts-beijing-mixing-military-1299and-commercial-interests-abroad-/6946010.html.1300---------------------------------------------------------------------------1301                           what's in a port?13021303    Ports involve much more than meets the eye. There are several1304strategic challenges presented by PRC activity in LAC ports:1305intelligence gathering and the potential for sabotage and adversarial1306military use.\16\1307---------------------------------------------------------------------------1308    \16\ https://www.csis.org/analysis/geopolitics-port-security-1309americas.1310---------------------------------------------------------------------------1311Commercial espionage with military implications1312    Under President Xi Jinping, the PRC has displayed an increasing1313interest in ensuring the activities of the private sector and state-1314owned companies serve the interests of the state. There are perhaps few1315examples that are better than ports, where the PRC is honing an ability1316to weaponize some of the world's most sensitive commercial information.1317The full extent of the PRC's information-gathering campaign is not1318known. The more rocks investigators turn over, however, the more they1319seem to find.1320    Beyond the requirement for Chinese companies operating overseas to1321gather and report information on foreign entities, PRC companies1322dominate the logistics software often used at ports. LOGINK is a1323Chinese logistics software that stores information such as maritime1324information, customs information, geolocation, regulatory filings,1325trade information, and booking data--in short, a treasure trove of1326data.\17\ Given the 2015 National Security law, as one columnist puts1327it, ``for Chinese firms, theft of your data is now a legal1328requirement.''\18\1329---------------------------------------------------------------------------1330    \17\ https://www.uscc.gov/sites/default/files/2022-09/LOGINK-1331Risks_from_Chinas_Pro-1332motion_of_a_Global_Logistics_Management_Platform.pdf.1333    \18\ https://thehill.com/opinion/cybersecurity/532583-for-chinese-1334firms-theft-of-your-data-is-now-a-legal-requirement/.1335---------------------------------------------------------------------------1336    Even non-PRC ports can present threats if they feature Chinese1337equipment to move and scan commercial freight, for instance. In other1338words, the PRC can engage in commercial espionage even at those ports1339where only its equipment is present. Something as benign as the ZPMC1340ship-to-shore cranes moving containers are likely a tool for Chinese1341commercial espionage.\19\ In a world where acute supply chain1342vulnerabilities are both commercial and defense concerns, Beijing's1343capabilities, even short of operating or owning a port, is a huge cause1344for concern. As two defense analysts have concluded: ``With virtually1345all the world's seaborne goods passing through or near Chinese1346infrastructure, Beijing could easily leverage the information it1347accesses in order to selectively seize critical goods, such as1348medicines; divert or delay military components; or let essential1349supplies just sit in storage--no naval deployments needed.''\20\1350---------------------------------------------------------------------------1351    \19\ https://www.wsj.com/politics/national-security/pentagon-sees-1352giant-cargo-cranes-as-possible-chinese-spying-tools-887c4ade.1353    \20\ https://foreignpolicy.com/2023/09/20/china-shipping-maritime-1354logistics-lanes-trade-ports-security-espionage-intelligence/.1355---------------------------------------------------------------------------1356    While the PRC is frantically collecting data on foreign ships and1357nations, it has blocked its own ships from sharing that data with other1358countries.\21\ This mirrors the country's behavior in other commercial1359domains: increase others' dependence on it while reducing its own1360dependence on others.1361---------------------------------------------------------------------------1362    \21\ https://www.bloomberg.com/news/articles/2021-11-24/china-1363blocks-access-to-maritime-shipping-data-ft-reports?sref=3OIZCXOE.1364---------------------------------------------------------------------------1365    Beyond commercial espionage concerns, PRC operated and owned ports1366are busy rewiring much of LAC's trade routes that will frustrate U.S.1367efforts to build safer and more secure supply chains in the future.1368Individual PRC ports intend to bolster China's competition in specific1369areas, such as ports that have been constructed principally or1370primarily to ship raw materials and critical minerals directly to1371mainland China.1372Hard security risks and potential conflict with PRC1373    Within the various domains of warfare--land, sea, air, space, cyber1374space--port operation and ownership is critical to advancing the PRC's1375goals in the sea domain. Ports have long been key to controlling the1376world's waters, and control of the world's maritime routes has always1377been the key to global power. Sir Walter Raleigh famously said: ``For1378whosoever commands the sea commands the trade; whosoever commands the1379trade of the world commands the riches of the world, and consequently1380the world itself.'' The Chinese are following a well-worn path: the1381United Kingdom's rise to global power coincided with the rise of its1382naval and maritime power; even more prominently, so did the United1383States'.1384    Chinese-operated and -owned ports host People's Liberation Army1385Navy vessels routinely. They also serve to reliably resupply and repair1386navy vessels during port calls. According to a global report by the1387group Maritime Executive, ``a third of ports in which China made1388economic investments have hosted and also resupplied military vessels1389of the People's Liberation Army Navy.''\22\ As a rising revisionist1390power challenging the current global order, the PRC's maritime strategy1391revolves around a seemingly innocuous web of port operations that can1392reliably serve multiple uses in multiple contexts. It is imperative to1393understand that the PRC does not conceive of ``inter-operability'' in1394the same way as the United States; rather, the PRC understands ``inter-1395operability'' in terms of reliability in times of crisis. Port1396infrastructure is yet another form of under-the-radar, yet novel state1397power projection capability.\23\1398---------------------------------------------------------------------------1399    \22\ https://maritime-executive.com/magazine/when-china-shanghais-1400your-port.1401    \23\ https://direct.mit.edu/isec/article-abstract/46/4/9/111175/1402Pier-Competitor-China-s-Power-Position-in-1403Global?redirectedFrom=fulltext.1404---------------------------------------------------------------------------1405    Southern Command has repeatedly highlighted several other areas of1406concern in its yearly posture statements to the U.S. Congress. SOUTHCOM1407has noted how PRC port facilities can engage in electronic or cyber1408attacks, Global Positioning System jamming, or even physical attacks1409from containerized anti-ship weapons systems.\24\ In a contingency1410situation, such disruptions could translate to significant1411vulnerabilities. For instance, last year, the U.S. House Select1412Committee on Strategic Competition between the United States and the1413Chinese Communist Party validated the idea that Hutchison's operations1414in the Panama Canal could delay military assistance to Taiwan.\25\1415---------------------------------------------------------------------------1416    \24\ https://crsreports.Congress.gov/product/pdf/RL/RL33153/277.1417    \25\ https://www.scmp.com/news/china/article/3262984/management-1418panama-canal-ports-hong-kong-firm-poses-risks-us-house-panel-hears.1419---------------------------------------------------------------------------1420    The PRC's maritime network is crucial to its strategy for global1421power projection. The United States should not expect the PRC to1422develop a similar network of naval bases around the world for power1423projection. Instead, Beijing intends to become a ``pier competitor'' by1424setting up a string of dual-use ports that can serve as an extensive1425international network of infrastructure for People's Liberation Army1426vessels.\26\1427---------------------------------------------------------------------------1428    \26\ https://www.foreignaffairs.com/united-states/chinas-port-1429power.1430---------------------------------------------------------------------------1431                   chinese ports and organized crime14321433    Do LAC's criminal organizations prefer PRC-operated and -owned1434ports? While the answer to this question is not yet settled, initial1435indications demonstrate that LAC's criminal organizations may prefer1436Chinese-operated and -owned ports for their opacity and the volume of1437transpacific trade they handle. China is often the market for many of1438LAC's illicit goods, such as illegal wildlife, gold mining, and timber1439trafficking.\27\ The PRC often insists on opacity and lack of1440accountability in many of its infrastructure investments in LAC.\28\ As1441one scholar summarizes: ``Bribes and corruption, in addition to1442coercion, are at the heart of any criminal organization seeking to1443exploit transportation or logistics facilities, including ports. This1444can involve paying a Customs official to overlook violations or a crane1445operator to load a specific container onto a truck driven by someone1446associated with a criminal organization, accepting or falsifying bills1447of lading, or ensuring that no one questions discrepancies in the1448information on manifests.''\29\1449---------------------------------------------------------------------------1450    \27\ https://thehill.com/opinion/4533956-radical-transparency-is-1451democracys-secret-weapon-to-counter-china/.1452    \28\ https://www.foreignaffairs.com/china/how-china-exports-1453secrecy.1454    \29\ https://www.csis.org/analysis/are-chinese-ports-latin-america-1455preferred-organized-crime.1456---------------------------------------------------------------------------1457    The potential for organized crime to exploit PRC-operated and -1458owned ports is made easier when ports are vertically operated and one1459company has control over all the functions of the port. In the case of1460COSCO Shipping in Chancay, Peru, the state-owned company has control1461over activities on the quayside, stacking containers, inspecting1462containers, port security, and other functions. Meanwhile, several1463investigative NGO's have documented the involvement of Chinese ports in1464illegal wildlife trafficking.\30\ Furthermore, illegal, unreported, and1465unregulated (IUU) fishing, committed often by the PRC, which has the1466largest fishing fleet in the world--a consequence of heavy state1467subsidies--often relies on Chinese-operated and -owned ports to ensure1468that illegal catch can make it ashore, become layered into legal fish1469stocks, and avoid the Agreement on Port state Measures intended to1470reduce IUU fishing. Even though China is not a signatory to the1471agreement, the document aims to bolster the capacity of developing1472countries to inspect cargo and flag catches that are the product of IUU1473fishing.\31\ Leveraging Chinese-operated and -owned ports can obviate1474the risks involved with IUU fishing. Last, in a detailed, 4-part1475investigation for Reuters, journalists uncovered how Chinese-made1476fentanyl precursors transit Chinese port terminals in Mexico's Lazaro1477Cardenas, Manzanillo, and Ensenada ports. In the investigation,1478criminal groups bragged about the ease with which they bribed port1479officials and ensured shipments of fentanyl precursors reliably entered1480Mexico through Chinese port terminals.\32\1481---------------------------------------------------------------------------1482    \30\ https://earthleagueinternational.org/wp-content/uploads/2024/148304/ELI-Operation-STELLA-MARIS-Investigative-Report-22-April-2024-1.pdf.1484    \31\ https://foreignpolicy.com/2020/10/30/chinas-hunger-for-1485seafood-is-now-latin-americas-problem/.1486    \32\ https://www.reuters.com/investigates/special-report/drugs-1487fentanyl-brokers/.1488---------------------------------------------------------------------------1489                      toward a spectrum of concern14901491    Not all ports are alike. Chinese activity in LAC ports varies1492widely, leading to divergent risks throughout the region. It is1493imperative that policy makers ruminate on a set of characteristics that1494can rank the threat of individual ports to national security and1495American interests. The following 4 criteria offer 1 initial rubric to1496evaluate the risks of a given port project and thereby better calibrate1497a U.S. response.1498    The first criterion is location, both in terms of the proximity of1499a port to the U.S. mainland and its position vis-a-vis key maritime1500trade routes. The closer a port is to the United States, the greater1501potential it holds as a hub for intelligence gathering and potentially1502as a staging ground for covert action against U.S. interests. For this1503reason, PRC-owned and operated ports in Mexico, Central America, and1504the Caribbean basin present some of the most important and immediate1505challenges. However, proximity to the continental United States is not1506the only way in which strategically-located ports can offer China a1507possible asymmetric advantage in competition with the United States. By1508controlling key maritime choke points, the PRC can exercise influence1509on the flow of international trade.\33\ For this reason, the PRC's1510presence, through Hutchison Port Holdings' operation of the ports of1511Balboa and Cristobal in Panama, has been the subject of much1512consternation in recent years. Further south, China has also sought to1513make inroads along Cape Horn, which controls the Drake Passage from1514Atlantic to Pacific as well as access to Antarctica.\34\1515---------------------------------------------------------------------------1516    \33\ https://porteconomicsmanagement.org/pemp/contents/part1/1517interoceanic-passages/main-maritime-shipping-routes/.1518    \34\ https://americasquarterly.org/article/why-the-u-s-and-china-1519suddenly-care-about-a-port-in-southern-chile/.1520---------------------------------------------------------------------------1521    The second criterion is the mode of cooperation between China and1522the host country. Projects like the Port of Chancay in Peru, where a1523Chinese state-owned enterprise not only builds, but maintains an1524ownership stake and operational control over the port, should rank1525highest in this assessment, followed by ports where a PRC company has1526control over day-to-day activity. According to research by the Center1527for Strategic and International Studies, there are at least 14 ports in1528LAC where Chinese companies have either acquired a port in whole or in1529part, or possess a lease granting them operational control. By1530contrast, PRC companies have assisted with construction efforts in 181531ports throughout LAC. Contract construction is a less serious form of1532influence but nevertheless grants the PRC familiarity with a port and1533its infrastructure, as well as the ability to install preferred1534equipment and capabilities. This can translate to durable influence,1535particularly in the port technology space. For instance, while the1536planned expansion of the Colon Container Terminal in Panama by the1537Landbridge Group was canceled in 2023, Chinese security cameras1538installed as part of the project remain in place to this day.\35\1539---------------------------------------------------------------------------1540    \35\ https://www.csis.org/analysis/paper-tiger-or-pacing-threat.1541---------------------------------------------------------------------------1542    A third criterion is the relationship between the host government1543and Beijing. In general, the PRC cannot leverage LAC ports for military1544purposes without the approval of the host government, limiting the1545wartime utility of civilian ports. If, however, a port is located in a1546country which already has an adversarial relationship with the United1547States, this political hurdle becomes far easier to clear. Thus,1548special attention should be paid to port projects in the Western1549Hemisphere's 3 consolidated, anti-U.S. dictatorships--Cuba, Nicaragua,1550and Venezuela. Chinese companies have already assisted with 3 port1551construction projects in Cuba, including the modernization of the port1552of Santiago de Cuba, as well as 2 in Venezuela.\36\ The United States1553should remain vigilant for any proposed initiatives in these countries1554that could offer a permissive environment for the PLAN to operate.1555---------------------------------------------------------------------------1556    \36\ https://www.csis.org/analysis/chinas-intelligence-footprint-1557cuba-new-evidence-and-implications-us-security.1558---------------------------------------------------------------------------1559    Finally, the fourth criterion is the criticality of a particular1560port to global trade. The more that commerce passes through a given PRC1561port facility, the greater potential for information gathering and1562influence. In 2023, the ports of Manzanillo and Lazaro Cardenas in1563Mexico, operated by Hutchison, ranked third and eighth respectively in1564LAC by throughput, while Hutchison's 2 ports along the Panama Canal,1565when combined, would fall between fifth and sixth.\37\ The new port of1566Chancay currently ranks lower in this standing, but if plans1567materialize to expand its capacity to move up to 3.5 million 20-foot1568equivalent units (TEUs), these numbers could catapult it to the third-1569or fourth-place spot. The more China is able to exercise influence over1570major nodes of commerce, the more it helps to rewire global commerce1571toward Beijing--and concomitantly, away from the United States. In1572times of conflict or crisis, this could also increase China's ability1573to maintain access to the raw commodities, particularly minerals and1574foodstuffs, it imports from LAC, helping further insulate the PRC from1575economic pressure.\38\1576---------------------------------------------------------------------------1577    \37\ https://www.porteconomics.eu/ranking-2023-of-latin-american-1578ports-and-container-terminals-the-seesaw-game/.1579    \38\ https://cimsec.org/to-prepare-for-pacific-war-by-2027-the-1580united-states-must-harden-its-southern-flank/.1581---------------------------------------------------------------------------1582                            recommendations15831584    With enthusiasm for China's BRI waning in recent years, and1585following Panama's courageous decision to end its participation in BRI,1586the United States has several opportunities to advance maritime1587security and port infrastructure security. The United States must find1588a way to make a better offer to LAC.\39\1589---------------------------------------------------------------------------1590    \39\ https://www.csis.org/analysis/enabling-better-offer-how-does-1591west-counter-belt-and-road.1592---------------------------------------------------------------------------1593    Yet, the United States cannot do this alone; it must rely on its1594partners and the multilateral financial banks to help ease the burden1595of responding to China's growing presence in LAC's port systems.\40\1596Countries such as Japan, South Korea, Taiwan, the Netherlands, and1597Australia are key partners in this endeavor.1598---------------------------------------------------------------------------1599    \40\ https://www.csis.org/analysis/responding-chinas-growing-1600influence-ports-global-south.1601---------------------------------------------------------------------------1602    Conduct a study to review LAC port security.--Similar to the Biden1603administration's supply chain review meant to identify vulnerabilities1604in key supply chains, a study could identify data the PRC has access to1605and the intelligence and surveillance each of its LAC ports permits it.1606A mandated study would also force policy makers to develop their own1607methodology for a spectrum of concern. Relatedly, a study that1608identifies the ports of greatest concern could then recommend law1609enforcement cooperation with local authorities to target the potential1610criminal use of PRC ports and improve transparency at PRC port1611facilities.1612    Insist on greater transparency in tenders, contracts, and1613operations.--The PRC excels at operating in opaque areas. LAC1614governments, too, have an incentive to reveal little about PRC port1615operations in their countries, and with greater PRC interest, tenders1616and contracts often fail to meet high standards. In LAC, the United1617States could select 1 or 2 ports to reform and ensure best practices.1618If reform is significant enough, Western companies will be more1619interested in operating LAC ports. This will require the United States1620to be more nimble and aware of opportunities when they present1621themselves. For instance, the United States was asleep at the switch1622when the Hutchison subsidiary Panama Ports Company received a 25-year1623no-bid renewal of its 2 port concessions.\41\ Washington ``literally1624zoned out.''\42\ Likewise, the United States failed to help Peru push1625back against the PRC regarding the operation and ownership of the1626Chancay megaport by Cosco Shipping. The PRC insisted upon these terms1627even though the Peruvians found an ``administration error'' that1628contravened the country's domestic law.\43\ Rather than help Peru1629wiggle out of the contract with legal assistance, the United States1630stood by while Peru actively changed its domestic law to permit an1631arrangement that was previously illegal.1632---------------------------------------------------------------------------1633    \41\ https://www.csis.org/analysis/key-decision-point-coming-1634panama-canal.1635    \42\ https://www.csis.org/analysis/panama-zoned-out-strategic-1636opportunity.1637    \43\ https://foreignpolicy.com/2024/05/13/peru-learns-to-read-the-1638fine-print-in-china-deals/.1639---------------------------------------------------------------------------1640    Maintain overhead imagery collection programs on select PRC1641ports.--The United States should maintain strong overhead imagery1642collection on Chinese-owned and -operated ports in LAC to ensure they1643do not expand or quietly but fundamentally alter their nature. When a1644commercial port in the United Arab Emirates was caught expanding to1645accommodate military vessels, the PRC was forced to cease constrution.1646When this happens, the United States should leverage occasional public1647releases of classified intelligence to pressure local governments and1648the PRC alike to abide by contract terms.\44\ Imagery collection is1649also imperative for fighting organized crime and the nexus of1650transnational organized crime to Chinese ports. The appendix at the end1651of this document provides one example of how commercial satellite1652imagery might be used in such a way.1653---------------------------------------------------------------------------1654    \44\ https://www.wsj.com/articles/us-china-uae-military-165511637274224.1656---------------------------------------------------------------------------1657    Leverage DFC and multilateral financial institutions to launch a1658port buyback program.--The United States should leverage the U.S.1659International Development Finance Corporation (DFC) and multilateral1660financial institutions to engage in port buyback programs where the PRC1661is the owner. In the cases where the PRC is the port operator, these1662institutions may consider supporting a program to help countries1663terminate agreements early and entice more transparent operators to bid1664on concessions. This would constitute an offensive equivalent to1665leveraging partners to ensure competitive bids against the PRC when LAC1666countries announce a bidding process for port construction. Similarly,1667short of buying out PRC owners, the United States should stand up a1668program to reduce Chinese equipment--both software and hardware--at LAC1669ports. Current U.S. law does not permit assistance to foreign ports to1670extricate Huawei equipment or ZPMC cranes, for instance. Another1671approach could leverage economic incentives to move away from Chinese1672equipment at LAC ports that exacerbate U.S. vulnerabilities.\45\1673---------------------------------------------------------------------------1674    \45\ https://foreignpolicy.com/2023/09/20/china-shipping-maritime-1675logistics-lanes-trade-ports-security-espionage-intelligence/.1676---------------------------------------------------------------------------1677             Appendix: Selected Imagery of PRC-Owned Ports16781679    The below appendix contains images of relevant PRC port projects in1680Panama and Peru obtained by CSIS from Maxar Technologies.16811682[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]16831684    Chairman Gimenez. Thank you, Dr. Berg.1685    I recognize Mr. Davis for 5 minutes to summarize his1686opening statements.16871688      STATEMENT OF CARY DAVIS, PRESIDENT & CEO, AMERICAN1689            ASSOCIATION OF PORT AUTHORITIES (AAPA)16901691    Mr. Davis. Good morning, Chairman Gimenez, Ranking Member1692McIver, and distinguished Members of the subcommittee, thank1693you for the opportunity he testified today on critical issues1694for United States' ports and our national security. Let me just1695thank you for your bipartisan efforts to counter fentanyl. My1696best friend Sam died from an accidental overdose about 5 years1697ago, and I think of him every single day.1698    As the president and CEO of the American Association of1699Port Authorities, the unified voice of the U.S. port industry1700for the last 113 years, I'm honored to testify here. According1701to a recently-released economic contribution report from former1702CBO economists, our ports are responsible for $2.9 trillion in1703economic activity and 22 million American jobs, or more than 11704out of every 8 jobs in our Nation's work force.1705    China is investing in global port infrastructure exactly1706because it recognizes the profound economic and geopolitical1707advantages that critical trade gateways provide. There's been1708concern about Chinese companies at 5 terminals.1709    As this committee's Majority report highlights, we are1710talking about minority stakes in a handful of lease terminals1711and all tenants at U.S. ports must comply with laws,1712regulations, and oversight from all levels of government.1713Everyone knows we want the highest standard of security at our1714critical infrastructure.1715    The funding enacted through the bipartisan infrastructure1716law was historic, designating $450 million annually from fiscal1717years 2022 to 2026 for the Port Infrastructure Development1718Program, or PIDP. This critical funding is oversubscribed by 41719times.1720    Unfortunately, even at the height of Federal port funding1721here in the United States, we lag in comparison to China which1722spends well over double the U.S. in port investment. We also1723need to increase direct investments such as the Port Security1724Grant Program, which is authorized by this committee, however,1725it has unfortunately not been fully appropriated to its1726authorized level of $400 million in over a decade.1727    Another way to secure American ports is to manufacture1728cargo handling equipment, which China heavily subsidizes. While1729it would take years to stand up production lines, near-term1730Congress can permit friend-shoring with trusted allies to1731ensure U.S. ports have access to secure, reliable, and modern1732equipment while reducing reliance on China.1733    AAPA recently brought American ports, terminal operators,1734equipment manufacturers, Government officials, and other1735stakeholders literally to the same table to discuss how to make1736American-made cargo handling equipment a reality. AAPA is going1737to continue leading this discussion when we host another1738meeting here in March in Washington, DC, and we invite Members1739of this committee to join us.1740    To incentivize procurement from our allies we can1741streamline the waiver process for Build America Buy America1742provisions. Last year Members of this subcommittee recommended1743these waivers, as well as incentives for domestic1744manufacturing. Bravo Zulu, as we say in the maritime industry.1745    A major hindrance to growth, resilience, and modernization1746of ports is tariffs. Tariffs are attacks on American businesses1747and households. AAPA believes that expanding our Nation's1748presence in ports of allied countries is also critical to1749revitalize America's strategic maritime posture. AAPA has1750collaborated with the U.S. State Department to set up sister1751port partnerships in the Middle East, North Africa, and Latin1752America, and we facilitate other work between the U.S.1753Government and LATAM and Caribbean ports.1754    The bottom line today is that the United States continually1755regulates Chinese investment in ports. CFIUS is the primary1756mechanism for reviewing and mitigating any risks from foreign1757ownership or investment on top of our industry's work with many1758other Federal agencies.1759    Our port industry believes the best counter to Chinese1760influence, especially at ports in our hemisphere, is strong1761leadership by the United States through strategic port1762investment. We must strive to keep our port infrastructure1763modern and globally competitive.1764    Chairman Gimenez, Ranking Member McIver, and Members of the1765subcommittee, thank you for your time, attention, and1766leadership when it comes to U.S. ports. I'm looking forward to1767your questions. Thank you very much.1768    [The prepared statement of Mr. Davis follows:]17691770                    Prepared Statement of Cary Davis17711772                       Tuesday, February 11, 202517731774    Chairman Gimenez, Ranking Member McIver, and distinguished Members1775of the subcommittee, thank you for the opportunity to testify today on1776critical issues for United States ports and our national security.1777    Before I start, I would like to thank the committee for their1778bipartisan efforts to counter the flood of fentanyl, a substance that1779took the life of a dear friend of mine, Sam Spitz.1780    As the president & CEO of the American Association of Port1781Authorities (AAPA), the unified voice of the U.S. port industry for the1782last 113 years, I am honored to testify here. This is a special moment,1783since my former boss, former Congressman Dan Donovan, a man who I1784deeply admire, chaired another Homeland Security subcommittee.1785    According to a recently-released economic contributions report from1786former CBO economists, our ports are responsible for $2.89 trillion in1787economic activity and 21.8 million American jobs, or more than 1 out of1788every 8 jobs in our Nation's workforce.1789    Further, America's ports make trade possible, and they depend upon1790the support of the Federal Government and Congressional committees like1791this one. I would like to emphasize today that China is investing in1792global port infrastructure because it recognizes the profound economic1793and geopolitical advantages that critical trade gateways provide.1794    The port industry believes that the best counter to growing Chinese1795influence, especially at ports in our hemisphere, is strong leadership1796by the United States through strategic port infrastructure investment.1797Investing in port infrastructure enhances economic growth and national1798security. The U.S. Committee on the Marine Transportation System (CMTS)1799found that maritime infrastructure investment holds the potential to1800produce returns of $2 to $3 for every $1 spent. If we want to counter1801Chinese influence at ports and secure a safe and prosperous economic1802future, we must provide a strong, attractive alternative through robust1803American investment.1804    We must strive to keep our port infrastructure modern and globally1805competitive. The funding enacted through the Bipartisan Infrastructure1806Law was historic, designating $450 million annually from fiscal year18072022-2026 for the Port Infrastructure Development Program (PIDP). This1808is significantly higher than previous annual funding levels for the1809grant program. However, total Federal spending on water transportation1810remains around $4.5 billion, while State and local governments1811contribute around $6 billion annually to support the sector.1812    In recent years, AAPA ports also identified $32.03 billion for1813landside infrastructure needs, which has continued to rise. Another1814example of this disparity in funding is the list of applicants and1815grantees for PIDP, a discretionary grant program administered by U.S.1816Department of Transportation Maritime Administration that awards grants1817on a competitive basis to projects that improve safety, efficiency, and1818reliability of the movement of goods surrounding ports. This list shows1819that from 2019-2024, our ports requested over $12 billion in funding1820from the program, with only about $500 million allocated per year,1821meaning for every dollar awarded, ports requested $4.50. That's an1822oversubscription rate of more than 4 to 1. Unfortunately, even at the1823height of Federal port funding, the United States lags in comparison to1824China which (based on publicly available information) spends well over1825double the United States in port investment. AAPA is currently1826researching this disparity and expects to share more in the coming1827months.1828    We also need to increase direct investments such as the Port1829Security Grant Program (PSGP). The PSGP is authorized by this1830committee; however, it has unfortunately not been fully appropriated to1831its authorized level of $400 million in well over a decade. This1832program is how we turn security concerns into actionable investments in1833resiliency. Yet, ports typically receive less than half of the Program,1834with the balance going to municipal police departments.1835    Another potential avenue for investment in American ports is1836through policies to manufacture and procure cargo handling equipment1837(CHE). Currently, China has an outsized market share of the world's1838port CHE because their government heavily subsidizes the industry,1839allowing them to sell equipment at a much lower rate than competitors.1840If Congress wishes to reverse this trend, we recommend implementing1841policies such as a qualified tax credit for U.S.-made CHE, which AAPA1842supports in collaboration with manufacturers. We recently brought1843American ports, terminal operators, equipment manufacturers, Government1844officials, and other key stakeholders to the table to discuss how to1845make American-made CHE a reality. Our organization will continue1846leading this timely discussion when we host another meeting this spring1847and encourage Members of this committee to join.1848    While it would take years to stand up a domestic manufacturing base1849for the largest port equipment, in the near term, Congress can1850incentivize friend-shoring with trusted allies to ensure that U.S.1851ports have access to secure, reliable, and modern equipment, while1852reducing reliance on single-source manufacturing. To incentivize1853procurement from our allies, we can easily streamline the waiver1854process for Build America, Buy American (BABA) provisions, ensuring1855that port infrastructure projects can proceed efficiently. Last year,1856Members of this subcommittee published a report in conjunction with the1857Joint China-Select committee which recommended these BABA waivers and1858incentives for domestic manufacturing.1859    Another major hindrance to the growth, resilience, and1860modernization of ports are tariffs. Tariffs are a tax on American1861consumers that increase costs for businesses and individuals alike.1862They also reduce the efficiencies and wealth gained from trade and1863lower overall economic growth. America is a superpower because of free1864trade.1865    For ports specifically, tariffs lower cargo volume and throughput,1866which directly impacts a port's ability to raise capital for1867modernization, expansion, and employment, while also hampering their1868competitiveness in the global marketplace. Additionally, a reduction in1869port activity threatens thousands of American jobs tied to maritime1870commerce, further straining local and regional economies. A forward-1871thinking trade policy that minimizes unnecessary tariffs will ensure1872the continued vitality of U.S. ports and support economic prosperity1873across multiple industries.1874    While AAPA only advocates on behalf of U.S. port authorities, we1875believe that expanding our Nation's investment in ports of allied1876countries is also critical to revitalize America's strategic maritime1877posture. Through programs such as the Sister Port Initiative at the1878Department of State, we can strengthen economic ties with Latin America1879and other regions, ensuring that American businesses benefit from1880efficient and cooperative trade. AAPA has collaborated with the State1881Department to set up 2 sister port partnerships in the past year to1882help foreign ports learn best practices from their American1883counterparts, and we look forward to continuing to participate in this1884program. We also continue to work closely with Latin American port1885authorities to promote shared economic growth and security, reinforcing1886U.S. influence in the hemisphere.1887    Chinese investment in U.S. ports is already closely controlled1888through robust regulatory frameworks, ensuring that any foreign1889investment in critical infrastructure does not pose national security1890threats. The Committee on Foreign Investment in the United States1891(CFIUS) is the primary mechanism for reviewing and mitigating any risks1892associated with foreign ownership or investment. CFIUS closely examines1893each individual investment to evaluate if it aligns with U.S. national1894security interests, which is a more precise approach than any blanket1895bans. Our current laws provide stringent oversight and protective1896measures to prevent exploitation or undue foreign influence.1897    Finally, the Coast Guard--one of many agencies overseeing and1898regulating ports--recently released several relevant regulations1899enhancing cybersecurity at ports. These include physical access1900safeguards on CHE sourced from China (MARSEC 105.5), restrictions on1901the operating systems they can run (Logink, which no U.S. ports use),1902and updated cybersecurity requirements (Cybersecurity in the Marine1903Transportation System). Additionally, ports are subjected to1904duplicative cyber incident reporting requirements, reporting to both1905the Coast Guard and CISA (CIRCIA).1906    While maintaining the highest standard of security, it is important1907to recognize that discussions about Chinese investment in U.S. port1908terminals are properly contextualized. We are talking about minority1909stakes in a handful of individually leased terminals, not entire ports.1910A single port often consists of multiple terminals, each with separate1911operations and oversight.1912    Chairman Gimenez, Ranking Member McIver, and Members of the1913subcommittee, thank you for your time and attention on our Nation's1914ports and maritime industry. America's ports are vital to our national1915security, economic stability, and global trade. By making wise1916investments and leveraging our existing regulatory safeguards, we can,1917together, continue to ensure that our Nation's ports remain1918competitive, keep America safe and secure, and realize a more1919prosperous and growing future for our Nation and her people.1920    I look forward to your questions and working with this committee to1921advance policies that support America's ports. Thank you.19221923    Chairman Gimenez. Thank you, Mr. Davis, and I am sorry for1924your loss. By the way, for those who don't know, if you died of1925overdose of fentanyl, 97 percent of the precursor chemicals1926that create fentanyl are manufactured in China. Even worse than1927that, those precursor chemicals are actually illegal to sell in1928China and yet the Chinese Communist Party actually incentivizes1929companies to produce them for export.1930    They have no other use, by the way. It is just for1931fentanyl, so it was something done by the Chinese Communist1932Party on purpose to kill, basically, American lives.1933    That is why you know when they asked why I am so, you know,1934so hawkish on China and, you know, think they are greatest1935threat, this is an example of why I think that they are our1936greatest threat. They did it on purpose and for no other reason1937for I guess to harm us and also to make money.1938    I now recognize myself for 5 minutes for opening statements1939or for opening questions.1940    Mr. Kroenig, you mentioned the presence of China and the1941Chinese-controlled ports on both sides of the Panama Canal. How1942does that pose a threat to the United States?1943    Mr. Kroenig. Well, I think it poses a number of challenges.1944One to the topic we just discussed, China is shipping fentanyl1945precursors through the Panama Canal. Second, by operating the1946ports there, including with surveillance technology, Chinese1947surveillance technology, they're using that to collect1948information that's going back to Beijing.1949    It may not be Classified information but it's sensitive1950that China could use to exploit for an intelligence advantage.1951China could seek to hinder trade through the canal, which would1952have negative economic consequences for America's well-being.1953    Then----1954    Chairman Gimenez. How could they do that? How could they1955hinder trade? How can they stop it? I mean, the port operators1956on both sides do they determine who goes first, who goes1957second, et cetera, or how does that work in the Panama Canal?1958    Mr. Kroenig. Yes. Well, in terms of the specific operations1959some of my colleagues may be better able to speak to that, but1960halting, disrupting trade in a place like that would not be1961very difficult. I think we've seen in other cases where ships1962get stuck in, say, the Suez Canal, global trade really takes a1963hit.1964    So I think there are a number of things they could do to1965hinder trade, such as putting a ship in the canal and not1966letting other ships go through. So there's the economic1967dimension.1968    Then there's the military dimension in the event of a1969crisis or war hindering U.S. naval vessels that could make it1970more difficult for the United States to project military power1971where it needs to go.1972    Chairman Gimenez. Fair enough.1973    Dr. Berg, in terms of the presence of China, the ever-1974increasing presence of China in infrastructure, especially in1975ports, my first question is where were we? Because when I1976visited Peru, and I know they have a huge port they just1977constructed in Peru, and they are actually putting out an RFP1978for a second port down in south Peru and they want us to1979participate. They really want us to participate.1980    Where has the United States been for the last, I guess, 21981to 3 decades down in South America?1982    Mr. Berg. Chairman, I agree wholeheartedly with your1983concern. I think we were looking in other theaters of the world1984and we had forgotten, frankly, that security, prosperity,1985economic integration, the ability to deter illegal immigration,1986and so on, it starts right here at home and in our own1987hemisphere.1988    So, I welcome this administration's focus on the Western1989Hemisphere, which seems to me a very intense focus on the1990Western Hemisphere. I think it's proper and it's about time1991that we spend more time looking into not just our security but1992also our commercial diplomacy in this hemisphere.1993    The problem, Mr. Chairman, is that we're playing from1994behind now because we focused on other theaters in the world1995for 40 or so years, at least. Especially with ports, Mr.1996Chairman, it's far easier to play offense than it is to play1997defense to get the U.S. private sector interested, for example,1998in the port you've just discussed in Peru than it is to try to1999get the Peruvians to wiggle out of this new mega port, for2000example at Chancay.2001    Chairman Gimenez. Yes. Look, one of the things that I found2002when I was down in South America is that we were more2003interested in ideological diplomacy than in commercial2004diplomacy, OK, focus on stuff that really did not advance2005American interests at all.2006    So, Dr. Kardon, when we talk about military use of these2007facilities and you haven't seen much, maybe my premise is that2008they are going to build all the infrastructure and then they2009are going to appear because if they don't--if they start to2010appear now then then it, kind-of, you know, kind-of, shakes us2011and wakes us up.2012    But they are building that infrastructure, right, the2013ability to somehow then project power into our own hemisphere.2014They have the largest Navy in the world right now. They are2015building more and more ships, completely outpacing the United2016States in terms of other ship production. Their large Blue Navy2017ship production completely outpaces us here in the United2018States and so is there a threat to that?2019    They are building the facilities. Will one day all of a2020sudden we will see a bunch of, you know, People's Liberation2021Army Navy in our own hemisphere, in our own backyard?2022    Mr. Kardon. Chairman Gimenez, you're absolutely correct2023that pretty much any commercial port is intrinsically dual-use,2024particularly the modern facilities that Chinese firms are2025constructing, owning, and operating in the hemisphere.2026    But as you also note, there has been relatively minimal PLA2027operational activity in this hemisphere. While I agree that2028it's possible for them to do it on relatively short notice,2029sailing across the Pacific, I think from a strategic standpoint2030it's unlikely that Beijing chooses to make this hemisphere the2031area where they're trying to match up militarily against the2032United States, in at least the near term.2033    The main reason for that is their overwhelming strategic2034focus remains in the western Pacific for its Taiwan2035contingencies, but also the South China Sea and East China Sea.2036So, while I think it's a reasonable concern and one that ought2037to be monitored, I think it's somewhat unlikely that they2038attempt to project large amounts of power into this hemisphere.2039    Chairman Gimenez. I agree with you on short-term. My time2040is up and I will just make one final statement is that the2041Chinese have a very long-range point of view and that they look2042at things 100 years ahead, not like us. We look at things 22043years ahead.2044    So with that, I will yield, and I recognize the Ranking2045Member from, you are from?2046    Mrs. McIver. New Jersey.2047    Chairman Gimenez. From New Jersey, OK.2048    Mrs. McIver. The Garden State. The Garden State.2049    Chairman Gimenez. The gentlewoman from New Jersey, Mrs.2050McIver.2051    Mrs. McIver. Thank you, Mr. Chairman. On Sunday, Vice2052President Vance tweeted that judges aren't allowed to control2053the Executive's legitimate power. Then yesterday, a Federal2054judge said the White House had disobeyed the plain text of his2055direction to release billions of dollars in Federal grants2056which Congress appropriated but the administration has tried to2057freeze.2058    Now, I am not sure what they teach at Yale Law School, but2059I am an educator myself, and in New Jersey's Tenth we teach2060students in elementary school that the Legislative branch2061writes the law, the Judiciary branch interprets the law, and2062the Executive branch enforces the law. This isn't hard.2063    If this administration refuses to comply with the court2064orders, we will be in a scary situation in this country, not2065just because we will face a Constitutional crisis, but also2066because Federal grants are critical to our safety and security,2067including at our Nation's ports.2068    DHS administers the Port Security Grant Program, which was2069funded at $90 million in 2024, for critical security projects.2070The Port of Newark has relied on that funding, as well as2071funding from the bipartisan infrastructure law.2072    Mr. Davis, how important are Federal grants to U.S. port2073security and infrastructure? Would any freeze on these grants,2074like those attempted by this administration, have any impacts?2075    Mr. Davis. Thanks for the question, Congresswoman. The2076Federal funding for port infrastructure is critical, and I give2077all legislators across the spectrum a huge bravo for the2078attention that they put on intermodal infrastructure funding2079and supply chain resilience through all the various programs at2080U.S. DOT, Department of Homeland Security, et cetera, et2081cetera. The funding increase has been amazing for2082recapitalizing a lot of aging infrastructure at our ports.2083    Specific to your question, we're monitoring very closely2084what's happening with the administration with the caveat that2085the President has the prerogative to impose his policy2086preferences as he sees fit and within law.2087    We're, of course, watching very closely to make sure that2088any monies that were appropriated, or even more importantly,2089obligated, monies that have been obligated already they have to2090flow. There's a contractual right in the recipients of these2091grants that they get their funding. So, this is something we're2092watching very closely.2093    Mrs. McIver. Thank you. In your opening statement you2094talked about how, you know, this Port Security Grant Program2095was originally authorized for $400 million in funding but since2096has been underfunded. Can you talk a little bit more or2097elaborate on what kinds of projects and security upgrades will2098ports be able to make with more funding?2099    Mr. Davis. Thanks for the question, Congresswoman. The2100types of projects run a gamut. You can imagine everything from2101physical fencing, bollards, camera systems that protect the2102gate as we usually call it around the port, to much more2103cutting-edge machine learning, AI, defensive measures to2104predict, preempt, and respond to cyber threats.2105    It's well-known that many of our largest gateway ports2106receive tens of millions of attempted cyber intrusions per day,2107per month, I'm not sure exactly, but tens of millions per month2108at least.2109    So, the types of projects that this critical grant program2110funds across the gamut all really important, all really good2111for responding to the changing nature of a lot of threats that2112the ports are seeing.2113    Mrs. McIver. Thank you, Mr. Davis, and I too want to offer2114my condolences for the loss of your friend. Thank you for2115sharing that story with us and those who are watching and those2116here.2117    With that, Mr. Chairman, I yield back.2118    Chairman Gimenez. Thank you to the Ranking Member.2119    I recognize the gentleman from New York, Mr. Garbarino.2120    Mr. Garbarino. Thank you, Chairman. You are from the Sixth2121Borough, right, in Florida, New York?2122    Chairman Gimenez. Yes I actually am.2123    Mr. Garbarino. OK. Thank you, Chairman.2124    Mr. Davis, modern port operations rely heavily on digital2125logistics, AI-driven cargo tracking, and automated systems,2126making them highly dependent on cyber networks and2127interconnected technologies. If the People's Republic of China2128controlled ports in Latin America or even PRC-affiliated2129terminals within U.S. ports were compromised, that could2130provide the Chinese Communist Party with the capability to2131conduct espionage, manipulate global supply chains, or even2132sabotage critical logistics operations in a crisis scenario.2133    In your assessment, how susceptible are Western Hemisphere2134ports to cyber intrusions or sabotage by PRC-affiliated2135entities?2136    Mr. Davis. Thanks for the question, Congressman. It's a2137good one, especially it, kind-of, segues nicely to the changing2138nature of threats to ports, especially as internet of things,2139IOT, more connected equipment at the ports, right?2140    I don't want to opine too much on what's happening at Latin2141American facilities because I think my fellow panelists2142probably have a little bit better view, but in the United2143States we, of course, take this super seriously.2144    Whether it's daily interface with Federal agencies, CISA,2145U.S. Coast Guard, which is the lead agency for cybersecurity at2146seaports, CISA. U.S. Coast Guard.2147    I personally sit on a DHS Maritime Sector Coordinating2148Council where we share threat information across the maritime2149supply chain, not even just the ports but talking barge,2150carriers, marine terminals. So, we have 4, including the ISAC,2151Information Security Analysis Center, where we share2152information about threats across all the players in the chain.2153    Ultimately, I point to the LOGINK example. This was a2154Chinese-developed software. I'm not sure of its status in use2155at ports around the world, but this is a great success story of2156U.S. Government in partnership with industry identifying2157something that carried too much risk that we didn't want to2158upload or use in our IT and OT at ports.2159    So we stiff-armed it said we're not going to use this at2160U.S. ports. So, I see that as a great success story in terms of2161the collaboration with industry and Government.2162    Mr. Garbarino. So, you think Government is doing a good2163enough job right now to reduce this U.S. maritime sector2164reliance on PRC manufacturing port equipment? Or do you think2165there is more that we can do and does Congress need to act?2166    Mr. Davis. I think our on-going partnership is strong and2167satisfactory, but if we do want to take a further steps to2168regain further control over our supply chains and where our2169equipment is manufactured, we do support a reshoring program2170for large-scale cargo handling equipment, such as cranes and2171other cargo handling equipment in ports.2172    Mr. Garbarino. You talk about the ISAC and information2173sharing. Is it pretty free-flowing between private-sector2174partners as well as Government? Are you getting good2175information, timely information shared by U.S. Coast Guard and2176CISA or could that be better?2177    Mr. Davis. It's pretty good. I'd love to work with you and2178your staff to improve it. I've seen how ISAC's work in other2179critical infrastructure sectors like banking, health care, et2180cetera, and we probably have a bit to go to get to that2181robustness.2182    It's certainly not Government's issue either. We could2183share information better just simply among industry, and that's2184what the trade association is for as well so I'd love to work2185to strengthen it.2186    Mr. Garbarino. All right. Thank you, Mr. Davis.2187    Dr. Kroenig, despite the well-documented security risks2188associated with the PRC's manufacturing and surveillance2189systems, including cameras from Hikvision and network security2190systems from Huawei, they remain prevalent in Latin American2191ports and logistic hubs. These facilities are critical to U.S.2192trade and often handle shipments bound for American ports.2193    The presence of PRC-controlled surveillance systems raises2194concerns over whether China's Communist Party could use this2195infrastructure to track U.S.-bound cargo, collect intelligence2196on U.S. business operations, or gain insight into regional2197military activities.2198    Do you believe the continued expansion of PRC-affiliated2199surveillance technology in Latin American ports presents a2200security risk?2201    Mr. Kroenig. Yes it does present a security risk for all2202the reasons that you mentioned, and I'd say even more broadly2203if China comes to control the digital infrastructure of the220421st Century in Latin America in the global south, what does2205that mean for the future of democracy and human rights in those2206regions? What does it mean for their global alliances?2207    So, I think this is a threat to the United States and that2208we should encourage regional allies to derisk from China and to2209end cooperation with China and with Huawei and then also to2210work to provide them alternatives.2211    Mr. Garbarino. How do we encourage them to derisk? What can2212Congress do?2213    Mr. Kroenig. Well, I think one is making the case and2214making clear that we're not asking them to choose between the2215United States and China. There are areas where they can2216continue to have productive relations with China, but there are2217areas like this where it's in their national security interest2218and in our national security interest that they end the2219program.2220    Then the second thing that Congress can do is work to find2221alternatives and help the administration to develop a2222coordinated plan with allies. If the United States is doing it2223on its own that's one thing. If we can do it in partnership2224with the Europeans, the Japanese, and others, that's much more2225powerful. Provide incentives for the private sector through DFC2226and some of the other mechanisms that have been mentioned. So2227again, encourage them to derisk and then provide alternatives.2228    Mr. Garbarino. Thank you. I yield back.2229    Chairman Gimenez. I thank the gentleman from New York. Yes2230I do represent the Sixth Borough and your future home, Miami.2231    I now recognize and welcome the gentleman from Texas, Mr.2232Turner.2233    Mr. Turner. Thank you, Chairman Gimenez and Ranking Member2234McIver. I represent a large portion of Port of Houston and the2235ship channel generating millions of jobs, nearly a trillion2236dollars in economic activity.2237    One of the issues that we have been facing are these ship-2238to-shore cranes used in many U.S. ports. The Biden2239administration announced a $20 billion deal to develop domestic2240manufacturing of these cranes. I fully support that and it is2241important that that money continues to flow.2242    But let me ask Mr. Davis, how long do you foresee before we2243have enough of these cranes made in the United States to meet2244the demands of our seaports in a reliable way?2245    Mr. Davis. Thanks for the question, Congressman. It's a2246great one and really speaks to the thinking several steps2247ahead, right? I don't have a great sense. The manufacturers of2248these equipment would have a better sense of how long they2249could stand up production lines, but my best, most aggressive2250estimate is about 2 years hence. That's not from right now.2251That's from when, you know, the funding is in place, the2252purchase orders are put down, so give or take we're talking a22532-year time line.2254    That, of course, even if we were able to create a domestic2255manufacturing program would take years and years and years to2256replace all of these key equipment at the ports. So, they could2257start rolling off the line within a couple of years but to2258replace the hundreds of cranes that are across the country2259would take many years, which is why we stand by the fact that2260in the near term using the equipment that we're using now is2261the right way to go while also pursuing reshoring.2262    Mr. Turner. Because most of these type of cranes that are2263needed at the Houston ship channel, as we widen and deepen the2264port, are made in China. Would you all agree that we need to2265make significant investments here to reduce our national2266security risk? Either one of you?2267    Mr. Davis. Agree completely, Congressman. We support the2268ability of any of the ports to get the best equipment that's on2269the market right now, including Port Houston's on-going crane2270purchases and installation.2271    Mr. Turner. Let me follow up on the Port Security Grant2272Program, which we receive, is there anyone who disagrees with2273the importance of that security grant program? Anyone who2274disagrees with that? OK.2275    I want to shift to something else because all of you have2276indicated the need for the United States to make significant2277investments in this area. Under USAID, about $44 billion in2278investments are made. Of that amount, about $1.8 billion is2279made to the Western Hemisphere in terms of investment.2280    I would think that by cutting off those investments at2281USAID, which helps to counter the PRC's Belt and Road2282Initiative in Latin America, that we are enhancing our national2283security risk and we are opening the door for the PRC to step2284in when we are stepping out, and especially when we are2285stepping out without any real notice being given to Latin2286America, Panama, you name it across the board, in fact, across2287the world.2288    Do you all see the significance? Anyone? My question is, is2289it significant under the USAID program that $1.8 billion has2290been given to the Western Hemisphere? Anyone would question2291that?2292    In fact, Mr.--excuse me, actually no one is challenging2293that.2294    Dr. Berg, you indicated that we should ``up our game.'' Can2295you elaborate a little bit more on that? What do you mean, more2296investments being made in the United States, more investments2297being made in the Western Hemisphere?2298    Mr. Berg. Thanks for the question, Congressman. I think2299it's a question occasionally of investments, but it's also a2300question, to the Chairman's point, of commercial diplomacy. I2301think we need to flip the mindset of some of our diplomats in2302the region.2303    I mentioned a couple ideas where I think we could recruit2304more people who have private-sector backgrounds, bring them2305into embassies in a fast track way, and also to make it part of2306an ambassador's performance evaluation.2307    With respect to USAID, sir, I think there are ways in which2308we can make USAID, and I certainly hope that in the next2309iteration of USAID it is more strategic. So for example, this2310hearing has focused quite a bit on Panama. We closed our USAID2311office under the Obama administration----2312    Mr. Turner. Yes, but let me just, let me just--and I hate2313to cut you off. I hate to cut you off, Dr. Berg, but when we2314are making those investments to the Western Hemisphere if we2315cut them I think we're sending the wrong signal to the PRC.2316They then step in even more.2317    Thank you, Mr. Chairman.2318    Chairman Gimenez. I thank the gentlemen from Texas.2319    I now recognize the gentleman from Arizona, Mr. Crane.2320    Mr. Crane. Thank you, Mr. Chairman, for holding this2321hearing today. I want to take a minute to talk really quickly2322about something that Ms. McIver brought up. She was talking2323about the influence that China had on Elon Musk.2324    You know, it is interesting. I didn't hear Ms. McIver or2325any of her Democrat colleagues raising these same concerns when2326we uncovered that the Biden family received $28 million, $272327million from foreign countries and they tried the exact same2328thing with President Trump in the last Congress.2329    The reason I think it is important to point this out is the2330interesting thing between, you know, Elon Musk and President2331Biden is Elon Musk actually owns multinational businesses,2332SpaceX, Tesla, Neuralink, just to name a few. So, I think it is2333important that we make that distinction.2334    I do think this hearing is important today. You know, when2335I look at what Sir Walter Raleigh famously said, he said, ``For2336whoever commands the sea commands the trade. Whoever commands2337the trade of the world commands the riches of the world and2338consequently the world itself.'' So, I am concerned about what2339I see China doing in the Western Hemisphere.2340    I want to start with Mr. Davis real quick. You spoke of the2341need for domestic manufacturing or acquiring infrastructure2342used in our ports to avoid a reliance on the CCP's equipment2343which is used for espionage. Can you go into what countries you2344are speaking of, some of our allies that can, you know, provide2345some of this equipment for us, sir?2346    Mr. Davis. Thanks for the question, Congressman. China is2347currently not the only place where these ship-to-shore cranes2348are sourced or manufactured, although they have a dominant2349position in the market. Some of the other companies are either,2350who make these equipment, are either headquartered or have2351manufacturing facilities in Germany, Austria, Ireland, and I2352believe some of the componentry might come from Mexico. So,2353that's the state of play in this market.2354    Just for the record, Congressman, the industry does not see2355a current situation or risk where there's any compromise of the2356equipment. But if the United States does want to shift toward a2357situation where it is making or friend-shoring these equipment,2358certainly here at home there are lots of manufacturers here in2359the United States that are penciling out what this would look2360like, especially if they had financial support from the U.S.2361Government. It could also be from any of the other countries2362that I mentioned.2363    Mr. Crane. Thank you. In regards to fiscal conservativism,2364I am sure many of you guys know that we are approaching $372365trillion in debt. We are spending about $2 trillion annually2366that we don't have, adding to that every single year.2367    I am looking, and the information that I was able to pull2368is that, let's just take the Port of Los Angeles, for example.2369In 2024, the Port of Los Angeles generated $684.7 million in2370operating revenues. The Port of Seattle, in 2024 the Port of2371Seattle generated $1.2 billion in operating revenues.2372    Now, I realize that these are private. These are privately-2373owned companies, correct? Why aren't these private companies2374investing a lot of their resources so that the Federal2375Government and the taxpayer doesn't come out and have to2376subsidize them?2377    Dr. Kroenig, I am going to give that one to you.2378    Mr. Kroenig. Oh, I'd say a few things. I completely agree2379that the debt and the deficit are major issues and so coming2380back to our colleague, Elon Musk, I think his efforts to look2381for waste, fraud, and abuse and to find savings makes sense.2382    Even when it comes to USAID, USAID was set up for strategic2383competition during the Cold War to advance American interests.2384Then I think it loses its way over time and so I think trying2385to restructure U.S. foreign aid to prioritize concrete U.S.2386interest and strategic competition makes a lot of sense.2387    In terms of the decisions made by the companies operating2388the ports on the Western Hemisphere, I'm probably not the best2389to speak to that. Maybe I'd defer to Mr. Davis or to others.2390    Mr. Crane. I will let either of you guys take that if you2391want.2392    Mr. Davis. If I may, Congressman?2393    Mr. Crane. Yes, sir.2394    Mr. Davis. That all of the port authorities in the United2395States are public entities. They're chartered by cities,2396counties, States, and many of those revenues go actually to2397public coffers. They go into the Treasury to pay for all their2398services for the local, urban area, or county or whatever it2399may be.2400    So, I'd love to work with you and your staff on some of the2401specifics of those ports, but they're public entities that are2402often paying back profits into public Treasury.2403    Mr. Crane. What percentage, Mr. Davis, are most of them2404paying back?2405    Mr. Davis. Let me get you that number, Congressman.2406    Mr. Crane. Thank you. I yield back.2407    Chairman Gimenez. Thank you, gentleman from Arizona.2408    I now recognize the gentlewoman from South Carolina, Mrs.2409Biggs.2410    Mrs. Biggs. Thank you, Mr. Chairman.2411    I want to sincerely thank our witnesses for their valuable2412contributions to this important hearing today.2413    So, the United States Coast Guard is essential to securing2414maritime trade and enforcing laws that protect our national2415security. They safeguard our borders, they ensure the security2416of global trade, and they combat illicit activities at sea.2417    The People's Republic of China's growing control over2418strategic maritime choke points, its engagement in illegal2419fishing, and the suspected use of commercial shipping for2420surveillance and illicit trafficking, all directly threaten2421U.S. homeland security.2422    Because the Coast Guard patrols these critical waterways,2423we must evaluate whether they have the resources and the2424authority needed to effectively address these threats.2425    So for Dr. Kardon, how does the PRC's expanding influence2426over global shipping routes and strategic ports, including in2427Latin America and the Caribbean, impact U.S. homeland security2428and the Coast Guard's ability to police illicit trade and2429trafficking?2430    Mr. Kardon. Thank you, Congresswoman Biggs. I believe that2431the extraordinary market share of Chinese firms and global2432shipping and actually across all the verticals, you know, that2433include shipbuilding prominently or investments, of course,2434shipping itself, containers, leasing, et cetera, gives China a2435strategic advantage in the modern economic system.2436    We heard the Sir Walter Raleigh quote. I think that2437resonates with leaders in Beijing. I for one have studied a lot2438of Chinese strategists' writings about the famous American2439naval strategist Alfred Thayer Mahan. Also, a leading influence2440in understanding sea power is something much broader than just2441naval capability.2442    The naval capability is actually subordinate to the access2443to markets and the freedom of maneuver around the world's2444oceans. The PRC has systematically invested in those2445capabilities. When we think about Chinese maritime power, I2446would urge us to think, of course, of their growing Blue Water2447Navy, but not exclusively.2448    In fact, if we look at where they're really, really2449differentiated it's areas like shipbuilding and in overall2450trade volumes and in its position in global supply chains and2451value chains.2452    So, I do think that this poses a broad strategic threat to2453the United States. As I note in my testimony, I think the acute2454military threats from it are somewhat overstated, but that's2455not to say that it's not a major strategic risk. I think what2456I'm urging from the standpoint of legislation and policy is to2457really focus on rejuvenating American maritime power.2458    Over the past 25 years, China has systematically invested2459in its maritime power and one could make the argument that the2460United States has systematically divested or, sort-of,2461accidentally divested from it. So I think that's really the2462center of gravity in our strategic competition and warrants2463close attention.2464    Mrs. Biggs. Thank you so much.2465    My second question this is for Dr. Kroenig. So, given2466reports of PRC-affiliated vessels engaging in espionage, the2467illegal fishing, and smuggling, is the U.S. Coast Guard2468adequately resourced and authorized to confront these threats?2469Adding on to that, what additional capabilities or legislative2470measures might be necessary that we can help with?2471    Mr. Kroenig. I think the U.S. Coast Guard and the U.S.2472military more broadly is not adequately resourced to deal with2473the China challenge.2474    If we look during the Cold War, the United States spent an2475average of 7 percent of GDP on defense. Now, we're spending2476something like 3\1/2\ percent of GDP on defense, so historic2477lows.2478    So I think Senator Wicker and some others who have called2479for 5 percent defense spending makes a lot of sense and so that2480should be investments in the Coast Guard and also investments2481in our naval power more broadly.2482    The United States has really fallen behind here and it has2483been U.S. dominance on the high seas that has enabled really2484the U.S.-led order since 1945. So, I think this is a major2485problem and major investments are needed.2486    Mrs. Biggs. Thank you so much for your comments, and I2487yield back.2488    Chairman Gimenez. Thank you to the gentlewoman from South2489Carolina.2490    I now recognize the gentleman from Puerto Rico, Mr.2491Hernandez.2492    Mr. Hernandez. Thank you, Chairman.2493    I support efforts to counter Chinese influence in Latin2494America and the Caribbean. To do that we need to strengthen our2495own ports in Latin America and the Caribbean, both for economic2496development and for public safety reasons.2497    Ports like the one we have in San Juan are important for2498the island's economic development and emergency response2499preparedness. Federal investments in infrastructure are2500critical for strengthening U.S. port infrastructure that itself2501is essential for maintaining our global competitiveness,2502particularly with China.2503    However, infrastructure projects take time and many funded2504by the bipartisan infrastructure law and other legislation are2505still on their way. These projects are now threatened by the2506Federal funding freeze putting our island's economic growth and2507emergency response preparedness at risk. In the long run this2508could benefit our global competitors like China.2509    Mr. Davis, in your written testimony you note that U.S.2510ports are already subject to Federal oversight mechanisms2511designed to ensure that foreign investments in critical2512infrastructure do not threaten national security. How would a2513Federal directive that freezes funding and hinders these2514agencies from carrying out their responsibilities compromise2515our national security and reduce our competitiveness on the2516global stage?2517    Mr. Davis. Well, thanks a lot for the question,2518Congressman. I think you hit the nail on the head by saying2519infrastructure projects take time. From the time that the2520potential grant is noticed by the Government to the time it's2521awarded, to the time it's permitted, to the time a shovel hits2522the ground, you can see how it adds up a lot, which is why the2523industry, and I know many industries are very hopeful for a2524bipartisan move forward on permitting reform for infrastructure2525projects at ports and other critical infrastructure and energy2526utilities and the like.2527    So, that's something we're looking forward to this2528Congress. But to answer your question directly, the President2529has his prerogative for his policy priorities that he wants for2530his administration, no doubt about that, but we come back to if2531monies have been obligated it's very clear that the law says2532they must flow to the recipients of those grant awards.2533    So, at the point that the grant is awarded to a recipient2534the money has to flow eventually, and that's something we're2535monitoring closely.2536    Mr. Hernandez. Great. I want to switch gears quickly to2537emergency preparedness. So, on Saturday evening a 7.6 magnitude2538earthquake hit the Caribbean and there was a tsunami advisory2539for Puerto Rico and the U.S. Virgin Islands. I think this2540tsunami advisory underscores how vulnerable regions like Puerto2541Rico and the USVI and the Caribbean, how we depend on strong2542modern ports for emergency response and recovery should a2543disaster strike.2544    What could be the specific economic and public safety2545impact of the Federal funding freeze on infrastructure2546projects, particularly in regions vulnerable to natural2547disasters?2548    Mr. Davis. Congressman, I'd answer the question by saying,2549unfortunately, natural disasters are becoming larger, more2550frequent, and costly and ports are literally on the front lines2551of many of these coastal areas that are susceptible to them. We2552estimate that the closure of a port has on the order of $52553million economic impact per day, so that really, you know,2554multiply that by 1 week and you start to see the overall toll2555of a disaster like that.2556    Mr. Hernandez. So, would you say that in essence these2557Federal funding projects to strengthen our ports'2558infrastructure could be seen as a long-term investment rather2559than a loss that would represent, you know, having these weak2560ports that it would have to close in the case of a natural2561disaster?2562    Mr. Davis. I agree completely, Congressman. The return on2563investment is a 3-, 4-, 5X, and I would point folks to the2564Association of the Society of Civil Engineers for some of their2565work on this on these figures.2566    Mr. Hernandez. This is a return on investment that will not2567only benefit places like Puerto Rico but would also benefit the2568United States and its broader ambitions to combat Chinese2569influence in the region.2570    Mr. Davis. No doubt about it. We'll be looking at a2571comparative study in coming months about how our trading2572competitors spend on their port infrastructure, and I think2573it'll open some eyes.2574    Mr. Hernandez. So, would you agree that this should be2575approached in a bipartisan manner, not viewing this just2576through the lens of traditional liberal-conservative spending2577versus Government cuts angle. It should be seen as something2578that concerns our national security, our economic2579competitiveness, and it should transcend political2580partisanship.2581    Mr. Davis. Congressman, forgive the corniness. The2582containers can be blue, the containers can be red, but shipping2583infrastructure is bipartisan.2584    Mr. Hernandez. Thank you. I yield back the remainder of my2585time.2586    Chairman Gimenez. The gentleman from Puerto Rico yields2587back his time.2588    We are expecting 1 other individual, 1 other Member to2589come. It was supposed to be at 11:20 so I will keep the hearing2590open until 11:20. Hopefully, he will show up. If not, then we2591will close. So, we are in recess for a couple minutes.2592    [Recess.]2593    Chairman Gimenez. The subcommittee will come back to order.2594    I now recognize gentleman from Iowa, Mr. Nunn.2595    Mr. Nunn. I want to begin by thanking Chairman Gimenez by2596starting off us on such an important topic today and allowing2597me to join your subcommittee. As we all know, the CCP's global2598ambitions are not limited by hemisphere or geopolitical2599boundaries.2600    They are masters of anti-access area denial across all2601domains, including that in space and are serving a threat2602across not just the Pacific but around our world.2603    Look, as a 20-year intelligence officer, including on an2604airborne operations, I have flown reconnaissance missions along2605the PRC's periphery and I have witnessed first-hand how Beijing2606operates. The PRC's investments are more than just about2607economics. There are tools for power projection, influence, and2608strategic positioning.2609    Right now in Argentina, the Chinese are developing a deep2610space station according to CISA. BYD's monopoly of critical2611batteries house goes--or the COSCO's deep water port in Peru2612and increased arms and weapon sales across China and throughout2613South and Central America. These are only a handful of the2614projects that they have undertaken, as has been highlighted2615today.2616    In Latin America specifically, Beijing has employed debt2617diplomacy, state-controlled enterprises, and political pressure2618to expand its foothold. I believe that if the United States2619gives our command and control of SOUTHCOM over to the PRC, my2620farmers in Iowa, manufacturers across the country, and folks2621just here in the United States will not only lack for the2622ability to operate there but will be boxed out completely2623around the world.2624    This region contains operations critical to international2625trade, shipping, agriculture, and strategic military positions.2626    So with that, I want to begin by thanking our new Secretary2627of State Marco Rubio for his recent visit to the region along2628with his commitment to halt the CCP's investment in the region2629and offer our friends in the Latin American community an2630opportunity to work with the United States for long-term2631security throughout the globe.2632    Today's hearing is a necessary step forward and thank you,2633Mr. Chair, for leading the charge on this.2634    So, I'll first speak to Dr. Ryan Berg. Dr. Berg, you are a2635director at CSIS and you have been making a massive2636investigation into China's foothold in Latin America. Many of2637the host nations view these investments as beneficial to2638themselves, either due to economic desperation or a lack of2639viable alternatives from the West.2640    How effectively are the Latin American governments2641assessing the long-term threat that China poses to their local2642economies?2643    Mr. Berg. Thanks for the question, Congressman, and it's2644wonderful to hear that you're consuming our products. We always2645love hearing Members reading CSIS.2646    Look, I think there's a fundamental problem with some of2647the democracies in the hemisphere. If you sign a deal to get2648shovels in the ground during your mandate, you might see2649shovels get in the ground during your mandate. You may even win2650reelection based on the feeling that the country is doing major2651infrastructure things with the PRC, but the price to be paid is2652later.2653    So we need to get better with our messaging game, whether2654it's debt trap diplomacy or whether it's opportunity costs2655associated with some of these deals, to have leaders understand2656that there are costs to be paid and they often come 2 or 32657mandates later.2658    That's the fundamental problem here, Congressman, and too2659often the best offer has been the Chinese offer because it's2660been the only offer. So, before you entered the hearing I spoke2661to a couple of the Chairman's questions as well as my opening2662statement about how we need to increase and improve our2663commercial diplomacy. I'd be happy to talk to you off-line2664about that as well. Thanks.2665    Mr. Nunn. As you know, we have seen this tragically2666throughout history. The Soviets doing it in Cuba and Latin2667America. The Chinese are much more insidious in their ability,2668both through wolf warrior diplomacy with the long-term tethers2669that they hold over these countries who, candidly, are looking2670for alternative partners to not be trapped in this situation.2671Thank you, Dr. Berg.2672    Dr. Kroenig, you're the vice president and senior director2673at Scowcroft, also incredible work you guys have going on2674there. I want to talk about the PRC's growing control over port2675infrastructure.2676    Obviously, the President has made this a top priority in2677Panama, but the deep water port investment in this area has an2678outsized influence. President Trump and Secretary Rubio both2679emphasized the seriousness.2680    What specifically both diplomatically, economically,2681hopefully not militarily, but we did get the right to sail2682through, steps can the United States be taking to deter China's2683influence and reestablish America's presence in these regions?2684    Mr. Kroenig. Yes. Well, thank you, Congressman and thank2685you also for the nice words about our work at the Scowcroft2686Center. So, I think there are a number of things the United2687States can do, and I think President Trump has been right to2688see this as a major priority and to put pressure on the2689Panamanian government.2690    You know, many of the governments, including the government2691in Panama, I don't think want this Chinese influence. Now,2692these are agreements that were entered to under previous2693governments and so the U.S. pressure is in a way doing them a2694favor.2695    So, as you know, right now they're reviewing some of these2696investments, an audit of these contracts. They probably will2697find Chinese corruption because that's what China does.2698    I think that will provide a great opportunity for them to2699end that contract and then rebid and American or other Western2700companies can win those concessions and I think that would2701advance American security and Panamanian security.2702    Mr. Nunn. I think it is fantastic that not only have the2703administration been able to redirect it so that U.S. naval war2704vessels who help protect the Western Hemisphere now can sail2705through that without paying a massive fee, oftentimes which2706goes to subsidize the Chinese, we should also recognize the2707Chinese are doing more than just the hard infrastructure2708projects. They are deeply embedded into every software,2709hardware technology, the actual SCADA and control systems for2710these.2711    So, I want to talk to Mr. Davis here, you also, the2712president and CEO of the American Association of the Port2713Authorities. The Chinese Communist Party has embedded itself2714within our actual U.S. port systems here, the supply chain, the2715critical infrastructure, or the software.2716    This includes through port equipment like ship-to-shore2717cranes, which the United States exploited--which could be2718exploited for cyber espionage, logistical disruptions, or just2719good old-fashioned spying. How do we get around this?2720    We have seen things like Salt Typhoon in a series of MSS,2721the state security out of China, threatening the United States2722and very little happening to hold these bad actors accountable,2723whether in Latin America or right in Beijing.2724    Mr. Davis. Thanks for the question, Congressman. I think2725there are 3 answers to it. First, it's the port industries2726partnership with Government and all the agencies that lead on2727cybersecurity or otherwise security measures at the ports,2728including U.S. Coast Guard, CISA, and the like.2729    Similarly within industry, we share threat. Ports share2730ports terminals and other maritime players all share threats2731amongst each other so that they can identify malicious codes,2732spear phishing techniques, et cetera, so that everyone's, kind-2733of, on guard and seeing the same thing.2734    The third is a lot of the much more sophisticated and2735technical defensive measures that ports, operators, and2736manufacturers take, including replacing some of the electrical2737componentry and software of some of the equipment with those by2738known parties, some of, some of which are United States2739companies.2740    There are other sorts of measures like that which I'd love2741to tell you and your staff about.2742    Mr. Nunn. We look forward to that. I want to highlight that2743the scope----2744    Chairman Gimenez. The gentleman's times has now expired.2745    Mr. Nunn. That is right. I yield back to the Chair.2746    Chairman Gimenez. Well, thank you.2747    I want to thank the witnesses for their valuable testimony2748and the Members for their questions. The Members of the2749subcommittee may have some additional questions for the2750witnesses and we would ask the witnesses to respond to these in2751writing.2752    Pursuant to committee rule VII(E), the hearing record will2753be open for 10 days. Without objection, this subcommittee2754stands adjourned.2755    [Whereupon, at 11:34 a.m., the subcommittee was adjourned.]27562757                                 [all]