whatever David spoon check yeah good catch we are a Shaolin devil let's love to like to have the committee come to order for today's hearing this is hearing today isn't about any one company or one sector or one nation this is about how Congress will respond to other nations in this case specifically China wiping out a US transit and rail manufacturing and yet taking way more of our high-paying blue-collar jobs I've been fighting these sorts of battles for many decades I oppose every so-called free trade agreement since I've been here I oppose China's ascension of the WTO under Clinton's premise that we put them in the WTO they'd follow the rules they don't they haven't and I'm gonna use all the tools we have to see that they don't decimate the freight industry in America like they did in Australia in a very short period of time and that they don't decimate our rail car as in a rail car and bus manufacturing in this country it's not just about the ultimate assembly it's about all of the parts that go into these vehicles and all the jobs that that they that they support so today we're gonna focus on that issue state-owned enterprises you know I was having a conversation with the president's economic advisor about the Jones Act when he said well you don't understand one free market guy I like competition and I said well Larry is a competition for an American shipyard to compete with the the government of Communist China and he really had to kind of think about that for a minute and they well you know I said yeah about competition with a level playing field in this case US companies currently produce a majority freight rail cars that we have one of the most robust freight networks in the world 65,000 jobs but as I mentioned earlier we saw that industry wiped out in Australia by China in a very short period of time and I believe they've set their targets and part of their 2025 plan is to take over that industry world wide with unfair subsidized in this case of the rail car company see our RC state-owned communist government of China owns the company and in the case of the PYD we have a company that is very heavily subsidized by the government of Communist China you know i strengthened had we had a long discussion we did the fast act and we moved up the Buy America standards of domestic content up to 70% and we're phasing we're phasing that in yet there are loopholes in the way things are defined sub assembly assembly component you know system whatever we've had these discussions before clearly the law needs some clarification and in the case of BYD there they take out they send over all these small batteries made in China I sent over a battery case made in China but workers here assemble it and then they claim that was made in America and it constitutes 53 percent of the value of the bus I mean clearly there's something wrong with the way that's being scored and that's not made in America so you know and I have a local example in my district sometimes politics is local my ltd my local bus company ordered some of these 50 BYD buses in 2016 after they finally were belatedly and outside the contract delivered and didn't work they were sent back Albuquerque of course is litigation with byd for dysfunctional busses and you know we you know I understand transit agencies are under a lot of pressure federal government hasn't been a good partner they got we've got a hundred billion dollar backlog for state of good repair in our transit which could be one hell of a lot of American jobs if we go about this right but the federal government hasn't had the will nor has Congress to raise the revenues necessary to better partner and begin to chip away at that deficit so some transit agencies have turned to these below cost of vehicles or very low cost vehicles and you know I again I can't totally blame them but you know for every u.s. transit railcar final assembly job and you know some of these are your Union jobs good jobs and this isn't about those workers they're doing the best they can with what the Chinese ship here for them to put together and they don't do the engineering and design work all that's done in China of where many of the problems a lie and for every one of those jobs we get as assembling a Chinese parts over here we lose 3.5 jobs in our economy and that that that includes an assumption that they're complied with by America which which I think in this case is very very questionable they're smart they unionized they put these plants in very strategic places they didn't know Democrats going to take over the house so they put the plant in Kevin McCarthy's district I think that would put it in someone else's district if they've known Democrats won't take over the house but they aren't dumb so we're here today to to get into this issue and see what remedies might lie legislation has been introduced in the Senate and in the house to address this issue Harley Rudo member this committee is the sponsor in the house and we will be looking and talking about that legislation here today in the hearing with that I'd yield back the balance of my time and recognize the ranking member representative graves Thank You mr. chairman a modern transportation infrastructure system means a strong and secure America and our public transit and freight rail systems are an integral part of our larger transportation network technology modernization which has been a priority of mine for a long time drives improvements in safety and congestion and it creates efficiencies however is we adopt transportation technologies safety and and cybersecurity have to remain top priorities earlier this month the federal government released a list of 55 National critical functions it's no surprise that these functions include transportation by rail and mass transit along with transport by air Road vessel pipeline all of the areas that this committee is responsible for overseeing any disruption or corruption to these functions or to our transportation network as a whole would have a very debilitating effect this is why today we are going to study the effects of state-owned enterprises or SOS our infrastructure network so either either wholly owned has been pointed out or either wholly owned or partially owned by a government that receives government funding to subsidize its operations these subsidies allow us so we used to gain us market share by under bidding on their contracts in addition as an extension of a government and SOE can carry out political economic and military interest of that state government it make no mistake we have to investigate the motivation and intent of SOS when they enter our infrastructure markets China in particular possesses sophisticated capabilities and it does have a track record of committing economic espionage focused on data collection of trade secrets and intellectual property and today we are focused on entrance to the rolling stock market and the impacts of these entrance on the public transit and freight rail sectors concerns have been raised about these recent entrants and particularly whether or not their ownership or access to government subsidies gave them an unfair advantage one of those recent entrants the Chinese China railway rolling stock corporation of the CRC successfully won contracts from public transit agencies in major metropolitan cities across the country to provide rail cars with significantly lower bids in the competition concerns exist at CRC will also expand to the freight rail sector and it's going to undermine a lot of US companies this committee plays an integral role in ensuring the safety in cybersecurity the entire transportation network I look forward to hearing about possible solutions to ensure that we protect us interests and maintain the security of our our transportation system thankful gentleman for his opening statement now I'd like to welcome our witnesses Mr Scott and Paul president Alliance for American manufacturing Brigadier General John Adams US Army retired president Guardian six consultancy LLC mr. Hamilton Galloway head of consultancy America's Oxford Economics mr. Frank Zulu foe director McCreary Institute for cyber and critical infrastructure security Auburn University mr. Zachary Khan director of government relations byd Heavy Industries and mr. Philip a Washington CEO Los Angeles County Metropolitan Transportation Authority thank you all for being here today look forward to your testimony but before we do hear from the panel I believe is Napolitano wanted to do a special introduction yes sir Thank You mr. chairman I am indeed and greatly honored to introduce Phil Washington the CEO of Los Angeles Metro since 2015 he has been a transformative leader in our region in Southern California as he has transitioned the LA metro bus lead to clean energy vehicles and he has passed major transportation measure to construct rail transit lines and remove highway choke points throughout LA he is leading on innovation with first mile and last mile solutions such as bicycle and pedestrian paths and on-demand transportation services she also is helping create the next generation of transportation workers with their workforce training partnership project labor agreements that support apprenticeship and is even creating a transportation focus high school for young people Thank You mr. Washington for being here I thank you very much yield back I thank the gentlelady would now proceed to our first witness mr. Paul mr. Paul you have five minutes you can summarize or extemporaneously talk whatever you want to do thank you I won't read the entire fifty five hundred words mr. DeFazio I would also thank you and I appreciate your long-standing and enlightened view on trade policy you have been proven to be correct about this I want to thank mr. graves and the members of the committee on behalf of the Alliance for American manufacturing a labor business partnership thanks for the opportunity to testify I'm gonna summarize my written testimony by making three points first China's state-owned enterprises in Beijing's economic policies that support these firms are a real threat to American jobs and security second firms in the rail and bus transit space such as CR RC and BYD that have established a foothold in the United States thanks in part to government contracts financed by taxpayers are part of this web and represent the tip of the iceberg third you can protect American jobs insecurity and demand reciprocity through legislation and regulation China's model of state-led capitalism has contributed to the loss of 3.4 million US jobs and the hollowing out of our industrial base as dumped and subsidized imports surged into our market since China joined the WTO in 2001 China heavily heavily subsidizes is 51,000 state-owned enterprises in almost every industry imaginable these SOS have devastated broad swaths of American manufacturing through dumping products by building up over capacity and targeting American firms with cyber hacking and IP theft the SOE czar also supported by policies including but not limited to discriminatory loan rates tax rates direct subsidies protected home markets lacks labor and environmental regulation and exchange rate misalignment but simply firms in the US and elsewhere are not competing with other companies rather they are competing with an entire nation which is amass 29 trillion dollars in value for these state-owned enterprises and now these SOS threaten the infrastructure arena two such firms CR RC & BYD have begun securing lucrative US taxpayer financed contracts to supply our major cities with transit rail cars and electric buses their ambitions are sizable establishing a substantial foothold in public procurement as a means of expanding into private sectors such as freight rail and passenger automobile markets as I illustrate in my written testimony CR RC is systematically working to drive established competitors out of the market and achieve a monopoly in transit rail car production now if successful this would be a disaster for taxpayers and for transit providers that are looking for legitimate fair and broad competition for their contracts and you can look at the Australian market for perspective in just the last decade CRC undertook a similar campaign leading to the obliteration of that country's domestic rail manufacturing sector and while final assembly of CRC rail cars may be local component and parts manufacturing include heavy Chinese content CRC's US assembly plants are a vehicle for this content to be delivered into the US market that puts 90,000 highways jobs many of them unionized in 750 companies and 39 states at risk of being displaced dominating the medium and heavy-duty electric bus sector is also in Beijing's plans a key feature of China's industrial policy is the support of national champions such as BYD be whities revenue growth has coincided slave with the trend of government supported subsidies access to below market rate capital and other industrial policies and it's clear that BYD is also a delivery system for Chinese imports at taxpayer expense an inspector general report issued by the City of Albuquerque calls into question the legitimacy of B Whitey's compliance with federal by America laws further evidence to support these assertions include B Whitey's public comments to the USTR requesting section 301 tariff aliy for made-in-china storage batteries parts and electric vehicles specifically noting for electric bus models already the world's largest electric vehicle company by sales BYD executives have been outspoken in their plans to one day sell passenger cars in the united states now this model would threaten over 5600 parts suppliers spread across the nation employing 871 thousand workers the very heart of American manufacturing my testimony today should not be read as an attack on the American workers employed by CRC or byd nor on foreign investment we must respect the dignity of work and encourage foreign investment but this is no ordinary foreign investment our workers in firms in the supply chain are not competing with a company in c RR c or b yd they are competing with an entire country i have policy recommendations that i'm happy to discuss in QA and i want to thank you for your time mr. chairman i think gentlemen yet next would be Brigadier General Adams that's better thanks good morning chairman DeFazio ranking member graves and members of the committee I want to thank you for inviting me to testify at this critically important hearing on securing our freight and transit rail sectors against Chinese state-owned enterprises my name is John Adams and I am a 30-year veteran of the US Army and president of Gardens Guardian six consulting we depend upon the freight rail system to provide safe reliable and effective transportation for our defense and homeland security infrastructure our national survival depends upon these rail links to transport for ease ample military equipment hazardous waste toxic substances and the range of products and commodities that support our entire economy u.s. freight rail is a strategic asset the health and integrity upon which our Armed Forces rely today I would like to draw the committee's attention to China's strategic targeting of the u.s. rail manufacturing sector with aggressive strategic and anti-competitive actions that threaten to turn this system from a bedrock strategic asset into a potentially crippling vulnerability these efforts are being driven by a Chinese SOE called the China railway rolling stock corporation a massive conglomerate wholly controlled by the Chinese government as part of coordinated efforts to advance Chinese industrial policy such as made in China 2025 so what are some of the tactics that CRC uses to infiltrate our rail industry first they have unlimited resources since they are backed by the Chinese government they can easily underbid their competitors in just the last five years CRR seized under bidding has allowed them to establish rail assembly operations for transit rail cars in two states along with research and bidding operations and several others emboldened with contract victories in four cities CRC continues to target other US cities including our nation's capital where the request for proposal includes video surveillance monitoring and diagnostics data interfaces and automatic train control systems that are susceptible to cyberattacks whomever is selected to supply rail cars for Omata become a partner in the day-to-day operations of a metro system who stops include the Pentagon and the capital as well as unfettered access to our nation's tunnels and underground infrastructure the prospect of the Chinese government using these trains for intelligence gathering is alarming Chinese built-in surveillance cameras could track the movements and routines of passengers searching for high-value targets from whom intelligence officials could vacuum data using the trains built-in Wi-Fi systems China already boasts of using the latest advances in artificial intelligence and facial recognition technology creating a very real chance that they have the capacity interest in doing so here in the United States even more alarming is that CRC can easily pivot into freight rail assembly a sub sector of rail that does not benefit from the same by America protections as transit rail concerns about CRC's transition to freight rail manufacturing are best illustrated by the recent experiences of third country markets like Australia is freight rail manufacturing sector CRC decimated in less than 10 years the Department of Defense is a long-standing reliance on freight rail most of the military's heavy and track vehicles are transported by freight rail meaning if freight rail runs through every military base in the United States freight rail is also core to the US Transportation Command DoD's global defense transportation system coordinating transportation assets around the world the national security concerns related to CRC cannot be underestimated Chinese intelligence awareness of u.s. rail logistical movements could provide China with a destabilizing strategic and economic competitive edge and of course Chinese access to US freight rail also means that the risk of malicious incursions into our rail infrastructure including those carried out by terrorists would become much more difficult for us operators to detect or counter while Congress has recognized and taken steps to address similar threats to products such as computer chips and cellular technology is equally important that policymakers enact legislation to stop immediately the scope and impact of China's ongoing incursion into an increasingly digitized rail network I greatly appreciate the committee's interest in addressing these critical issues we must safeguard our u.s. rail systems health and integrity before we lose it we owe it to the American people to ensure that the American freight rail sector continues to be a vibrant and secure element of our nation's infrastructure thank you again for the opportunity to testify I look forward to answering your questions precisely on time Thank You general mr. Galloway at Chairman DeFazio ranking member graves and members of the committee on transportation infrastructure thank you for inviting me to testify today my name is Hamilton Galloway and I'm the head of consultancy for the Americas at Oxford economics a leader in global forecasting and quantitative analysis Oxford economics has conducted several economic impact studies including those within the rail industry a September 18 2000 2018 study that Oxford did with the rail Supply Institute found that the rail supply industry supports 650,000 mostly middle-income jobs generated 74 billion dollars in u.s. GDP and touches every state this sector also supports hundreds of producers of parts components and systems for the rail supply industry now nested within this rail supply industry lies a sector that manufactures public transit and freight rail cars and rolling stock this sector employs over 21,000 middle-class workers in the US and supports nearly 190,000 jobs in the US in other words every job in the public transit and freight rail car and rolling stock manufacturing sectors of course nearly eight additional jobs in the US economy it is these jobs that are under threat by foreign state-owned enterprises foreign competition from SOS is an increasing challenge for the US economy because they operate with a different business model their core purpose is to fulfill a social or economic need in their own country's economy but in recent decades several SOS have become multinational as always pose a risk to us because they enjoy advantages like state direct subsidies concessionary financing from state-owned banks and regulatory exemptions these anti-competitive practices displace private sector competitors causing cascading negative effects upon business owners workers and families in the u.s. in 2017 Oxford Economics researched the potential disruption of SOS in the u.s. freight rail car manufacturing sector we found a pattern of anti-competitive behavior in countries outside the US with respect to pricing to cite one example this led to the collapse of australia's freight rail car manufacturing industry and we concluded that if similar practices were to occur here in the US they would have threatened 65,000 American jobs under one worst-case scenario if just 1 billion dollars in freight rail car sales were lost to an SOE nearly 13,000 jobs we lost in the US and 1.3 billion dollars will be lost to us GDP the bulk of this loss would be felt across the supply chains of freight rail car manufacturing recalling that these supply chains span every state in the Union at Oxford we recently turned our attention to passenger rail car manufacturing sector where SOS already established operations in the u.s. including final assembly facilities although rail cars will be assembled here a large number of the components are likely to be sourced from the SOS home country like China we assessed two scenarios of potential disruption in the first scenario the SOE does not need to adhere to Federal Buy America provisions which is currently set as 65% us content bulge up to 70% next year in this scenario we assume the municipality purchasing rail cars is not using federal funds so much of the rail car content will actually be made in the SOS home country in our second scenario we assume a good-faith adherence to buy America provisions which applies when federal dollars are used for context local municipalities including Boston Philadelphia Los Angeles and Chicago have already awarded contracts to an SOE three of these city contracts are entirely funded by state and local governments so the Buy America provisions do not apply in the non buy America scenario over half of the rail cars value is lost overseas this means that for every 1 billion dollars in rail car production is by an SOS SOE costs us more than 5000 jobs and 500 million dollars in GDP put another way for every final assembly job created by an SOE here in the u.s. 5.4 jobs are lost elsewhere in the US economy and the buy american scenario more of the rail cars values kept here in the US however we estimated that 1 billion dollars in production awarded to an SOE still leads to a net loss of 3,200 jobs in a reduction of almost 320 million dollars in u.s. GDP in this scenario every SOE final assembly job created still eliminates 3.5 jobs here in the US economy so ultimately America loses in both scenarios we just lose lesson or Buy America our research therefore suggests that anti-competitive practices by s.o.s could destabilize competitive private sector railcar manufacturing causing long-term consequences to productivity and efficiency this creates cascading negative effects across us due to the loss of private sector jobs and some is imperative that policymakers promptly acknowledge assess and respond to the SOS making headway in the u.s. rail industry to prevent the loss of thousands of jobs as well as hundreds of millions in wages GDP and taxes thank you again for this opportunity and I look forward to answering any of the questions that you may have well again very very good on the time Thank You mr. Holloway mr. Sulu Thank You chairman DeFazio ranking member graves and distinguished committee members thank you for the opportunity to testify before you today on an issue that is clearly of national importance and and I applaud your leadership in examining the impacts of foreign owned and state-owned enterprises on the transportation sector and critical infrastructure more broadly the subject is as timely as it is concerning given the impact to u.s. economic power national security military strength innovation and of course jobs at a top level and and I might no covering so much terrain in five minutes is a tall order especially for me since I've never had an unspoken thought but I'll try at the top level from a cyber perspective the threat comes in various shapes sizes and forms intentions vary as do capabilities topping the list of Russia and China they're both advanced persistent threats and both countries have turned to proxies to do their bidding the primary concerns include computer network exploit or the theft of information to include intellectual property and other forms of espionage as well as the mapping of critical infrastructure computer network attack or the means to disrupt destroy or modify information and/or their systems and of course the insider threat in relation to both Russian and state-owned enterprises I wanted to underscore that companies may willingly or even unwittingly serve as conduits of sent sensitive information as legal provisions in their countries require that they share information with the security services and they can even compelled to do so to give a sense of the scale and scope I thought I'd quickly tick off a very few examples and I'll focus on China since they account for over 90% of do J's economic espionage prosecutions and a vast majority of the cyber espionage cases it's also worth noting as general Adams brought up earlier the made in China 2025 plan most of the target technologies targeted are directly in the transportation committees jurisdiction and those that aren't touch your jurisdiction in that integral kind of way but to paraphrase Mark Twain and I'm not going to go over all the espionage cases whereas history may not repeat itself it tends to rhyme and there's a whole lot of rhyming going on right now taken individually each of these cases you can understand why people would brush them off in the aggregate however it sends a very strong and compelling message to our national security interests CRC we discussed briefly or general Adams did the significance of it having a foothold in our supply chain in some of the biggest cities in America obviously at 20 to 50 percent procurement bids under the competition this is an unlevel playing field but it is again consistent of a broader pattern here a broader strategy here drones what most people don't realize is Chinese manufacturer DJI has largely captured the American UAS market and in 2017 u.s. customs authorities allege that drones produced by DJ I provided China with access to u.s. critical infrastructure and law enforcement data major concerns about where the data resides and whether it's corrupted and/or transmitting data back to third parties cameras hikvision they're the biggest company in the world right now in terms of video surveillance equipment and they've had access to us infrastructures including schools prisons and even sensitive military and government installations 5g Huawei ZTE the strategic significance of 5g as the bedrock upon which tell communication and so much more will rely as direct relevance to the transportation sector not only does the attack surface grow exponentially but smart highways and vehicles of tomorrow will be paved in Silicon as much as they are an asphalt this would be the tech equivalent of building on quicksand since 5g is going to be at the very core at the operating systems of our smart infrastructures this is the crux of the executive order that the president promulgated last night financing foreign proxy entities can step in and scoop up the US assets and entities on the verge of bankruptcy or seeking startup capital these are two primary blind spots and sophia's those are two issues that I think the committee can play a role in elevating since China was the largest single foreign venture capitalist in the United States kima cumulatively between 2015 and 2017 the grid more than 200 Chinese transformers have come into the US energy sector during the past decade previously there were none and I can go on and on and on with the lists but let me just close with there are certain things we need to be able to grapple with here and what we can't afford to do is grind the US economy to a halt with blanket or overly blunt measures instead we need to tailor and calibrate our responses to limit collateral damage to US interests national security and free markets are not either/or propositions they're not mutually exclusive we can and must do both and I'll touch on any recommendations during the QA Thank You mr. chairman and sorry for blowing the the good record I know it's only 28 seconds you're doing it's a good panel all together thank you and they each had we were almost exactly on time mr. Khan I will try to make up those seconds chairman DeFazio ranking member graves distinguished members of the committee thank you for the opportunity to speak here this morning my name is Zack Kahn and I lead public policy efforts and government relations for BYD motors like to acknowledge several of our employees here from our Lancaster California facility as well as representatives from our union partners who are here as well thank you for the opportunity to speak t-today these are exciting times for BYD in america we recently delivered our 300th electric bus in the US and one of our first customers logged it's a millionth mile on dyd buses I do appreciate this opportunity to clarify that BYD is not a state-owned enterprise as discussed in my written testimony BYD is a privately held publicly traded global company with more than 200,000 employees 900 of which are in the u.s. Berkshire Hathaway energy is subsidiary of Berkshire Hathaway is B Whitey's long-term investment strategic partner and single largest outside shareholder our US headquarters are in Los Angeles we have multiple manufacturing facilities in Lancaster California UID is a proud Union company with a collective bargaining agreement with the International Association of sheet metal air rail and transportation workers also known as smart local 105 we have grown as I said to nearly 900 US employees including more than 775 smart union workers we also have a community benefits agreement with jobs to move America and smart establishing training and apprenticeship programs for workers with traditionally high barriers to employment who have been historically underrepresented in the manufacturing industry we are immensely proud of our diverse and talented workforce and invite any interest in members of this committee to come out to Lancaster to meet our employees and see what we are building there together new ideas invested more than 250 million dollars on our US operations last year alone uid spent more than 70 million dollars on components made by American vendors located all across the country which is twice what we spent in 2016 we source components from hundreds of US vendors partners across the country our procurements allow our vendors to create and maintain hundreds if not thousands of American jobs you buy these helping to create a truly competitive market in four buses in the year in America the competition has led to rapid technological improvements in the electric bus sector from manufacturers across the industry while also driving down costs and most importantly helping public transit sieze meet their clean air goals in a safe and economically viable way competition is the lifeblood of our country and rather than hurt the market this competition sparks innovation reduces acquisition and lifecycle costs and facilitates the growth and adoption of zero emission options for us transit operators the competition also creates new technology jobs outside of the vehicle manufacturer space UI for example BYD is the only manufacturer with numerous projects deploying in route inductive or wireless charging technology which has the potential to transform transportation electrification by virtually eliminating operator concerns about vehicle range view IDs worked directly with two companies momentum dynamics from Malvern Pennsylvania and wave from Salt Lake City Utah investing millions of dollars in initial projects with each company these companies are now deploying these technologies not only inside the US but also outside the u.s. in Europe and abroad as well as expanding their wireless charging applications to other industries besides transit buses we're not for this early support from BYD he's amazing and innovative u.s. startup companies wouldn't all likelihood have stalled out this is the kind of innovative technology that thrives in a competitive environment driving local investment and creating new manufacturing engineering and design jobs in the process we proudly note that we have had 14 different repeat customers who purchase zero-emission buses after their first deployments with BYD just this week Anaheim transportation network ordered 40 additional clean energy buses from BYD as their executive director Diana Cutler noted we've been operating for BYD buses on our routes over the past two years and based on their performance we are confident in view ids quality product and their support of our efforts to electrify our fleet thank you again for this opportunity to tell you about UID I look forward to answering your questions thank you again you were within time limits and we now turn to mr. Washington Chairman DeFazio ranking member Gray's congresswoman Napolitano and the Honorable members of this committee as a genuine honor to join you here to des thrilled to be here and happy the committee is called this hearing today there is not a single American manufacturer of mass transit rail cars and that is certainly an issue worthy of congressional consideration deliberation and action I'm pleased to submit my form own testimony for the record and want to summarize my testimony by sharing the following four points point one Americans America's proud mass transit history in my own backyard of Illinois having grown up as a child in the Midwest and specifically in public housing on the south side of Chicago I have great respect for America's a tremendous manufacturing history and the path to the middle class that history provided to millions of hardworking Americans while growing up as a child in Chicago and in the 1970s that was not aware that about 130 miles south of my home over a century before America was designing and producing mass transit rail cars in the town of Bloomington Illinois and this American town workers begin building the iconic Pullman coaches years later the company was set up his shop closer to Chicago within five miles of my public housing project in a town aptly called Pullman where thousands of Americans will spend decades building mobility for our nation I'd like to add it that at one time that Pullman Company was the largest employer of african-americans in the United States where members of my family were Pullman porters and worked primarily for tips and they were organized themselves as a Brotherhood of sleeping car porters under the leadership of a philip randolph 0.2 today for reasons that are both very complex and very simple there are no American manufacturers of mass transit rail cars so as was clearly explained in a very smartly worded you know Center for transportation report the companies that build transit rail cars and sell them to public transit agencies are all for companies as members of this committee are well aware there's a large Delta between the benefits of simply assembling rolling stock in the United States as opposed to manufacturing rolling stock in our nation to be clear when we lost that manufacturing base we also lost our leadership in the design and innovation realms to foreign manufacturers I say it's complex because I'm convinced that the absence of domestic transit rail car manufacturer is directly tied to both the intense competition of the global marketplace and government actions that have created an uneven playing field for rolling stock firms that said I also believe that the lack of any domestic manufacturer has taken place because of an absence of federal state and local rules and regulations that prioritize a dynamic and competitive environment for the emergence of the American transit rail car for Los Angeles our most recent rail rolling stock securement that was held in line with all current federal rules and resulted in any contract been awarded to CRC we entered into a contract on March 10 2017 to purchase 64 new heavy rail vehicles for our growing subway system with five additional options for another 218 subway cars the shell for these rail cars will be made in China and this assembly would be done in Springfield Massachusetts the third point is a US military veteran who enlisted in the United States Army as an 18 year old and retired as a command sorry major disabled veteran with 25 years of service I'd like to share that the following observation that has to do with manufacturing facilities of the Apache helicopter which was synonymous with our branch of service if we look at where this attack helicopter is manufacturers not abroad as in Mesa Arizona 4,000 Americans are building the Apache 0.4 like the Boeing plant and the base of suppliers surrounding and in and around Mesa I have outlined a vision for a one-of-a-kind center of manufacturing of rolling stock in the United States in Los Angeles County we're rolling stock would be not simply assemble but manufacturers so with support of the County of Los Angeles in the county and the city of Los Angeles we are taking that initiative as we move forward chairman de Fazio ranking member graves and honorable members of the committee on behalf of LA County I look to return to the committee in the coming year to share some positive news on our effort to stand up this country's only railcar manufacturing facility thank you I thank the gentleman with that we'd now turn to the first round of questions there we go so I was particularly alarmed at general Adams and mr. Sulu foes of testimony regarding the you know potential for cyber security breaches and I've just you know I mean could you just get a little bit more into that issue I mean how how much in a major deployment especially if we have to move our tanks I assume we are tremendously dependent upon the freight rail network I'm not sure how much it applies to the logistics chain could you address that all in general turn turn the mic on please let's look at that from the strategic perspective which I appreciate it's a good place to start first of all intermodal transportation is the key here and we think we need to focus on that as you know and as I said in the testimony freight rail runs through every military base runs through every American city runs through every Depot every port and the transfer of goods and services and commodities from freight rail to shipping is really something focus on from a strategic perspective that is where a potential adversary will focus as well first of all it's a really stress a strength of our our freight rail system that we have this kind of network that smoothly transports military goods hazardous waste and all sorts of other commodities from the place where they are produced or stored in the case of the military to port so that it can deploy overseas a strategic adversary will look closely at this as an imw and indications and warning a problem for them and they're looking closely at our rail network we we should be concerned about that from a strategic perspective let me I assume we don't limit the freight that goes through the basis I mean we may have people transporting chlorine through a military base to another destination is that possible yes sir absolutely and that's one of the reasons I'm sorry right and derailment of a chlorine vehicle a rail car would is potentially absolutely catastrophic potentially catastrophic and if I may since our rail cars are continuing or continually technology improved with one of the things that the telematics on our rail cars do is provide positive indication that hatch covers are closed for example sure a cyber security intrusion into that particular technology could give false assurance that the hatch covers closed all right mr. slough foe of briefly because then I have another question for another members panel I will try to be brief to two quick points here so we discussed some of the cases where you've seen theft of intellectual property and economic secrets as well as political and military secrets of the espionage sets of issues there's a Whitney in a long list of examples we can turn to in other sectors as well but I think what gets lost is disruptive and or destructive types of attacks and from a cyber perspective if you can exploit you can also attack it all hinges around the intent of the perpetrator so if they're in these systems they can use it for more malicious aim than just stealing secrets as bad as that is so basically when you think about the transportation sector your dependence on pnt on positioning navigation timing clocks is 100% so GPS and other issues that are maybe outside of what you would think of as transportation and disruptive attacks such as jamming or spoofing of some of these systems could could really take a major toll economically as well as from a national security standpoint and and I just want to bring one point on that on the defense side I mean the mission assurance there's an old adage amateurs talk strategy professionals talk logistics I think it was Marine Corps that came up with it but I am not a hundred percent sure logistics here is everything and if you impede the ability to project power you're basically in impeding the ability to fight and win wars so this is more than just a homeland security set of issues it is a national security set of issues okay Thank You mr. Khan I'm just a little confused here we invite you to testify and you were gonna we thought testify on behalf of BYD as a whole and you're you know we have a truth and testimony statement but an indicates you're testifying on behalf of BYD motors byd motors is the sales team subsidiary of BYD us holdings another subsidiary BYD coach and bus makes the buses so you you know basically I'm a little confused here are you here on behalf of the company as a whole or just on the sales team sure I I work for BYD motors I'm happy to talk about byd motors I'm I work at hand in hand with BYD coach and bus I can answer questions about be ready coach him but I just wanted to get that clear so PYD recognized in 2017 338 million in Chinese government grants on its income statement is that correct so which year was that is that hmm what year did you say 17 I believe that's correct I don't have okay all right and then the the batteries which are assembled here those are made in China correct the battery cells are made in China yes yeah so and somehow we assemble battery cells here and we say that's a made in America product when it's assembled so PYD since we've come here as followed the rules of the road when it comes to biomass I know I and it's very complicated rules and I you know we will act to clarify them component sub components and all that it's been gamed before and we you know it's being gamed here yeah you're following the rules the rules are defective so if if BYD were required to actually source the required amount of the vehicle in the United States oh you know by law would they do that or would they just close up shop even with the 250 million dollar investment just for just for as claire you talking specifically about the batteries I'm talking well I but once we reduce that down to a very minor component you're gonna have to source other things here in the United States so I thank you for the question I think what BYD would say to that would be we would have evaluated you know once those rules are promulgated for everyone we would evaluate it and see the opportunity we certainly as the demand for battery electric vehicles has grown around the world we we have I believe plans I don't know I don't know if we actually built them yet battery cell plans elsewhere so if there was the demand in the US for battery electric vehicles of the scale necessary to justify building our own plant that is certainly something we would explore okay thank you turn now to miss brave I'll go back to of mr. sloop oh just drill straight down in you know just to be straightforward on what this committee can do to better integrate cybersecurity and our transportation policy I mean what it's very concerning to me what what you said but I'll just shoot it straight out there Thank You congressman graves and thank you for that question because I think cyber is treated still as a black magic and an hour isolated or independent of other critical infrastructures I think it's actually part and parcel with everything your committee is is grappling with and looking at it's pervasive it's ubiquitous so what I would suggest is and I'm so happy you brought up the national critical functions in your opening statement so marry up the national critical functions that if this if destroyed or did this if you see issues to the national critical in functions to all of our various Lifeline sectors or critical infrastructure issues you need to start risk getting to a risk-based approach and and assessing and evaluating risk across modalities of transportation so I'd be looking at a series of hearings across all the different modalities looking at national critical functions and then racking and stacking and seeing where you have some common vulnerabilities that cut across all those and that's where I think you put your most muscle and weight behind trying to ameliorate the risk the reality is is if everything's critical nothing's critical but heck transportation is at the very top of that list if you're not moving we've got big problems on our hands so I would actually make this a broader set of issues that your committee can start weighing in and and then there are sectoral issues outside of your jurisdiction that you're gonna have to be able to work with your colleagues in other committees just as the executive branch is struggling with some of these issues so I think you haven't a major role to play here I think I would start by matching up the national critical functions with the different modes of transportation racking and stacking there and the other concept that might be worth looking at is how all of these entities come together so I had proposed in my prepared remarks a a testbed because we want to be testing these technologies before they are adopted in the market or used in the market but we look at the technology through a soda straw we look at it through a very narrow lens what we really need to be able to do is see how it impacts other in fist Rogers so I think you've got an important role to play if we can help in any way we want to but I think when you look at China in particular 2025 almost all of the issues they're interested in are in your in your bailiwick so I think cyber should be not a sidebar issue not a footnote I think it should be a principal issue your committee grapples with that's fine I'll yield my time to Paris Crawford oh okay with that turn 200 did it okay go ahead sorry Thank You mr. chairman thank the ranking member earlier today in fact concurrently as we speak the house permanent Select Committee on Intelligence is is holding a hearing on China's emerging digital authoritarianism and global influence operations targeting the United States and its partners I'm a member of that committee and I got to stay for the the oral testimony of four very highly credentialed individuals that presented testimony on that topic would ask the the chairman for a unanimous consent to enter that into the record thank you I think that informs our committee here as well and as you mentioned on the cyber side in particular so global influence operations shortly before delivering its first products to Jamaica last year the CRR see corporate twitter account showed the following I believe we have that on the screen I'll direct your attention to the screen if not I have the tweet in hand and that tweet reads following see our our C's entry to Jamaica our products now are offered to 104 countries and regions so far 83% of all rail products in the world are operated by CR RC or RC our RC ones how long will it take us for conquering the remaining 17% there's the the tweet on the monitor for your review one of those hundred and four countries that they referenced is Iran by the way interesting footnote mister Washington have a question for you when you used federal grant funds to purchase CRR C rolling stock for the Los Angeles metro did you know that it was an sob excuse me SOE hell-bent on quote conquering the global rail market thank you for the question I can't say I personally did but this was the best value procurement where two proposers bid on this we had evaluation criteria where CRC came in number one the evaluation criteria consisted of past performance delivery experience technical price all of those things but I can't say that I personally knew the SOE given given what we know and what has been shared with us in testimony mr. slough o has referenced this that's been referenced by the chairman of the ranking member giving what we know and what I just highlighted with regard to China's emerging digital authoritarianism and global influence operations and how that's extending into the United States it seems like and I understand your bottom-line oriented you have to be I know that particularly mass transit is an expensive enterprise and you're looking for the best value but given what we know about China's influence operations and how they're trying to project that in the United States wouldn't it behoove you to look for other sources that are not state-owned enterprises of a country who has really a malign influence campaign targeting the United States is that question for me yes sir as well and anybody else that wants to answer that sure no I stand by our procurement I stand by the process that we used I stand by the evaluation criteria that that we use to evaluate I stand by that well given the fact that other taxpayers outside of those in the area that you serve outside of the state of California contribute to funding operations like yours I think that we probably in the future ought to take a closer look because I think it's incumbent on us to be good stewards of taxpayer dollars and I don't really want to go back home to my constituents in Arkansas and say that their federal tax dollars went to help a state-owned enterprise of China to access mass transit projects in places like Los Angeles so I just think that we should probably endeavor to be better stewards and anybody that wants to do a comment on that mr. Khan certainly you're welcome to to chime in on this as well because I think there's probably some explaining that you might want to offer on that subject as well mr. congressman can I add one other thing too sure my response standing by the procurement does not mean that we will not do our due diligence as it relates to cyber security we are looking to perform penetration testing on the various systems the vehicle networks to wireless data communications all of those things so while standing by our procurement and our processes we still stand ready to do our due diligence as it relates to cybersecurity that's comforting I appreciate that thank you mr. Crawford just to to respond to your point I think UOIT is in a different different ball because we are not a state-owned entity we've never had state control we've always been privately funded and publicly traded I'm having a hard time believing that but that's a conversation for another time general Adams you made some pretty important observations with our freight rail moving through military installations how we move a material and personnel and things like that or certainly of strategic interest to countries like China wouldn't you agree yes sir and in fact it's one of the most important assets we have is that we can in fact move our military supplies or military equipment from basis to ports effectively because we have a good freight rail system but on the other hand that is also could be a crippling vulnerability if China were for example to build our freight rail cars they would be able to track them they would be able to know what's on them and we would lose the ability to move our military equipment without observation so I think I'm understanding you here basically the the the entry of the Chinese state-owned enterprises into our freight rail which is essentially what they're endeavoring to tee up presents a strategic vulnerability to us correct yes sir that is absolutely correct and if I may enlarge on that point just a moment please do we we also lose the ability to conduct if we only have the assembly operations here for freight rail or for transit rail we lose the rest of the supply chain we lose the R&D importance No thank you for that and that is important from this from a standpoint of for the future we need to preserve that supply chain here in the United States Thank You mr. Slough Oh would you like to comment on that as well yeah no I I think that the point you raised is really important in terms of global perception management or influence operations and obviously this is part and parcel of Russia's strategic plan which they look at its cyber very we mirror image we tend to think others look at it the way they do but perception management psychological operations camouflage concealment and deception this is all part and parcel of some of our adversaries cyber toolkits and and and you see that with respect to China as well and you've got two other countries that are starting to ramp up their activity Iran in North Korea they're by no means at the same level and integrating computer network attack and and exploit into their war fighting strategy and doctrine as the Russians and the Chinese are but what they lack in capability they more than make up for with intent and they're more likely to turn to disruptive and destructive attacks at least some of these the bigger country there's they have to weigh the consequences of some of their bad behavior which they've gotten away with murder if you ask me but that's a different question but I'm glad you brought up the influence operations because that is very much part of the cyber discussion we have to have it's more than just hacking into systems it's if you can actually create the outcome you want without doing any harm you're ten steps ahead and and if you can induce changes in behavior on the good guys side meaning we make decisions or we lose trust and confidence in our systems or we lose trust and confidence in our democracy or our transportation those are those are big issues to think about and that has to be part of the cyber discussion thank you a general general ABS final question here do you in your opinion you think Transcom is doing enough to secure freight rail movement do you think our Transcom is doing enough to help secure freight rail movement with regard to military operations I don't think we can do enough I know that Transcom is diligently working on it and resolutely working on it but I don't think we can do enough I think we should be very concerned about the threat I like the idea of the tips a bill that's been dropped in the house yesterday I like it in the Senate we need to stop their incursion in the freight rail especially and I think we have we're fortunate we have the opportunity to do that will help Transcom as they work hard but they need they need as much support as they can get thank you I thank the panel for their testimony and I yield back I think gentleman I just want to explain to members I went over on my time so we yielded the same amount of time on the Republican side to be to be fair and now we'll go to a 5-minute questioning and who's next representative Napolitano Thank You mr. chairman mr. Washington I would like to know if you think what steps could Congress take in the next surface transportation authorization bill to realize your vision of bringing the manufacturer of mass transit rail cars to America in a new case LA County and to follow up the are there challenges with research development and deployment of electric bus technology and what can Congress do to help thank you for the question and thank you for your advocacy as well and you're in the district and also for the transportation industry I think the best step that Congress can take is to one give preferential treatment to mass transit manufacturers to base their facilities in America and again I'm not talking about just assembly plants I'm talking about from soup to nuts to forge steel to do the things that real manufacturing outfits for passenger rail car vehicles do all over Europe in China we need to do that here so I think that a strong message from this committee to say and Congress to say that in the next transportation reauthorization bill that there will be a priority given for those regions that are looking to stand up in our case an industrial park that includes a manufacturing facility that includes electric bus manufacturers as well I think is very very key also and lastly enabling local hire and allowing local hire to be at least piloted again I think is very very key to making sure that if a manufacturing facility is stood up that local entities that in our case is putting in 82% of the funding for infrastructure in LA County would benefit well that's very good what incentives do you think Congress might provide to help transportation quarters make up the difference for the low bid for the company I think you know going through the process in our case I think the difference was maybe thirty million dollars or so I believe and that's in my testimony it wasn't not that big of a difference we had two bidders and so if Congress were to consider making up the difference I think that there's there are other things that are in the evaluation criteria that's not just price things like experience and project management and things like that so I think that has to be considered as well very good thank you mr. Washington I yield to mr. Lipinski or actually he has five minutes next if he wants because we did too and Moreau on the Republican side so if you want to do her a minute or you can use your five I use my five okay there you go all right okay you guys add oh don't make this too much too much more confusing well thank you mr. chairman for holding this hearing it's I have been working on this issue especially by American attles not as long as the the chairman has but I think that the fact that the Chinese government has made very clear in their their plan for their made in China 2025 initiative that they want to real manufacturing sector is a top target I think that should concern us on top of the what the ranking member of the rail subcommittee mr. Crawford pointed out that tweet by Sierra RC conquering the remaining 17% of all rail in the world is its we really need to wake up we need to understand what a threat this is in do something about it we can't just sit here and talk about it and then years from now when when it happens say well I remember talking about that but well it happened my first question mr. Galloway in Australia talked about how the freight rail car manufacturing industry was eliminated how long potentially could it how quickly could that happen here in the US and I know we have a much more robust market than domestic market that Australia had but you know how quickly could you see this happen a lot of that would depend on the level of investment that crc or other state-owned enterprises would be making here in the u.s. in terms of either establishing final assembly facilities specifically in freight rail which is where i think a lot of that actually depends on on the level of focus and investment that crse would be looking to make to disrupt it specifically freight rail which was the example I was pointing to in Australia I think it could it could occurred in less than ten years if the if the conditions are right in Australia the conditions were right Australia recognized China as a market economy get granted the market economy status that opened a lot of doors for a company like CRS you know to enter into that market and to utilize their tactics it displaced the market within freight rail there was a lot of other kind of global macroeconomic conditions that were taking place the Australia dollar was very very strong during that period and so that made the purchase of foreign rail cars much cheaper and so they were able to acquire CRC cars at a much lower price and on top of that Australia was engaged in a trade deal the Chinese Australian free trade agreement during that period which also opened up a lot of those doors for a lot of disruption within the marketplace I think there are some coral areas that are here in the US and and some of those specific instances that could ultimately open up those doors for that type of disruption here in the US and and it could span in that same period in terms of our own disruption what lovers do you suggest that we use in order to prevent that from happening here in us I think right now there's one lever that's being utilized through the section 230 to steel an aluminum tariffs that help to to mitigate some of those price advantages however you know we're looking at a short term solution to a long-term problem in the long term problem is you have a company that's owned by a foreign government that it is supporting that company and and ultimately the levers that need to get pulled is a long-term solution to move a state-owned enterprises wean them off of government subsidies and concessionary financing the tactics that they're using to disrupt the US economy and manufacturing mr. Paul do you have any suggestions and and what levers that we can use I do first a robust spend as the chairman indicated the federal government hasn't always been a good partner so if there's a stable long-term market there'll be more entrance into it the second is that CRC is predatory and we have to understand that there they now dominate the world rail market after being a bit player twenty years ago and the same thing that's happening globally will happen in the United States as they drive competition out an incumbent rail maker left Philadelphia after it left it after it lost its contract there and we can we can assume that's going to happen down the road so the the tips law legislation is a start we should also insist on reciprocity there is no American company that has the same opportunities that CRC or BYD have in the United States we don't have those opportunities in China China's not a signatory to the government procurement agreement it can discriminate and it does against our products and so we should ensure that we we have that reciprocity as well thank you yield back I thank the gentleman representative Gibbs five minutes davus I think he is here can I take Gibbs it's time to yeah hey wisely ride actually to make it even a little more confusing I'm going to yield my time to the gentleman from Michigan mr. Mitchell Thank You mr. Davis send mr. chair if I could have mr. Gibbs time too it will be interesting mr. Khan it's a long morning for you and it's going to get a little bit longer the 330 million dollars in Chinese grants our the terms of those grants I can't speak to the terms of those grants I just don't know the answer I could look at those get back to you well were they loans by the Chinese government trying to set up a number of incentive programs so I know some of them are voucher type programs that are similar to vouchers that we can receive in California somewhere you know with all due respect mr. Connor I think they've out your type programs the supports are get in California and from the Chinese government are a little different so we'd like detail for in writing to the committee what those grants work the terms of those grants whether they were loans where they had to be paid back be wide Eastbourne or directors how many members are there I would have to review the the annual report I believe it's five but I'd have to confirm let's assume you're right it's five two of them are let me see the Chairman mr. Schine true then there's a zoo the to charity two founders as they awarded own 33 point five eight percent of the company I did a variety of private equity deals and almost 34 percent is controlling interest to the company there's one other interesting guy who's on the board of directors making it three someone from the Renko group this is a state-owned defense company that's three three or five means you have control math is pretty simple right three or five yes that would be controlled but I don't know that the gentleman you just mentioned with Norinco I don't know about that well it's I I'm excited here where the footnote footnote 14 is the BYD 2013 interim report so I'm assuming that the Alliance for American manufacturing did their homework on its I suggest you may want to confirm that I I just if that's a 2013 report I don't believe that's the 28th why don't you why don't you detail for the committee the ownership the Board of Directors excuse me of a BYD as well as the overall organizational structure because as mr. chair note is used multiple companies and groups and sometimes that happens in companies is not a but to be absolutely asked with you we need to make a distinction in my opinion as we look at this mr. chair between state owned and State influenced can you share with us the thirty three point five eight percent of the company what the equity value of that when the company was founded how much was that I cannot share it but I can look into that and get back to you with that you're gonna have a list of questions okay pleasure that is and what terms what general sources did that money come from because they you know to be honest with you economic transactions in China are pretty opaque at best and I still have doubts whether or not the money that founded this company came from individual earnings or came through them to the Chinese government and you can paper all this you want in terms of have a unit agreement you have employees that's great we want employment America but if in fact whether this is technically state-owned or state influenced we have a problem here I also serve in House Armed Services and what's moving abundantly clear by the Chinese government is they plan to assume a dominant position in the world by 2025 in all aspects include economic this is a threat to security destination so let's not address this up and say that BYD is not state-owned when in fact I want documentation of how this company is funded where the money came from who the board of directors are this three to thirty eight million dollar grant and while the chair and I may have different perspective in terms of how we address this problem we need to in this country address predatory state-owned entities or state influenced entities that are taking jobs away from Americans and threatening our national security and unless you prove otherwise in terms of BYD mr. kind you could be on that list of people we're serious question why they're in the united states taking our government money I'm sending it to China so they're serious questions like I'd like to have addressed by a company and with that mr. Charlie you're back thank you I think gentleman next would be representative series Thank You mr. chairman and thank you for having having this hearing and it's a very informative hearing trigger the general I couldn't agree with you more on the concerns that this country should have about foreign entities being so involved in our rail system I really do believe that while we sleep this country's plot Russia China and I would believe of that just about all my life so with that as we get into these companies how do we track what they're doing or we don't does any entity and the government keeps an eye on these people that you know of what they're doing whatever whatever whatever if whatever their involvement is with us sir thank you for the question I know that our intelligence agencies are busily and resolutely working on that very problem and I'm encouraged to know that the Congress is also working on that problem this today represents a great moment I look at the glass half full for just a moment we know and we have awareness of the problem and I think that's the beginning of resolving it I prefer to the tip so bill before I think that's a very good step forward and I appreciate those that have both sponsored it and signed on to the bill we can't solve this problem overnight but we can certainly wake up as you suggest and begin to address it effectively we've still even if we stop Chinese incursion into transit rail and we prevent Chinese incursion into freight rail we're still going to have some mitigation that we're going to need to do because we've got Chinese made vehicles in our country and we need to do the proper mitigation primarily cyber security to make sure that they don't take advantage of us already allow me to suggest that the other thing we really need to do is look at this and and I know this is how you're looking at it this is just one front and a broad campaign China is directed from the top the Chinese Communist Party by the by laws of the of the China were at railway rolling stock corporation CR RC has to ask the Chinese Communist Party for guidance on any of the major operations the number of people on its board of directors who are also People's Liberation Army former People's Liberation Army personnel is is large there's a real overlap between the direction of the company and the direction of the Chinese Communist Party they don't do anything independently fortunately we live in a country where our businesses are independent we have a market economy and thank God for that but China doesn't work like that and I think the first realization and we have to have is this is one front and abroad in a broad campaign I also think that we have to make the American people aware more ways so they've become knowledgeable on what is going on actually I just think the American people sometimes it's just it's too late sometimes when they become aware of some of these things and I said look at Australia you know what happened to them I just want to ask mr. Washington or question some Washington one of the problems that you as an administrator have dealing with these foreign countries that are subsidizes that when you go for bid they come in very low now you as a point that you have to answer to the people how do you say to the people or I kid this guy is 20% cheaper we should go to them I mean that that's a nightmare you know having been a former elected official myself and when you take the bids you know if you take the higher bid they say all this guy's got to have something going with this guy yes you know so how do you deal with the public and say look this may be 20% cheaper but finally the the final product it may cost us a lot more at the end yes sir this particular solicitation was a best value and so we were not just looking at the lowest cost or the lowest price I should say and so most of these that have to do with rolling stock are usually the best value and so as I mentioned earlier the evaluation criteria in this case looking at past performance looking at past experience technical compliance project manager management expertise voluntary local Employment programs as well and price all of these things with price being one of six have to be looked at and I would also add that in our case with this solicitation we had two bidders CRC and a South Korean firm Hyundai Rotem coincidentally as the CEO in Denver when I was there I actually selected Hyundai Rotem and and I can't remember CRC bid on that but that goes that is reflective of the various evaluation criteria on any solicitation so it is tough to look at these kinds of things you criticized if you take something you don't I we're I'm sorry that's my time yeah okay all right sorry thank you thank you both representative Boston hey mr. chairman you know when we're looking at this I can see a similar situation and occurred in our steel industry both industries must compete against China's state-owned enterprises now you can you can magically say it's not but the reality is that from what the question is mr. Mitchell brought forward I think it is you now the solution might be a little different but the count outcome is the same China unfairly undercuts the competition and then comes in and dominates the market we could see that with the email that was sent out you know Congress here in Congress I worked on a law to sponsored that would improve our anti-dumping and countervailing trade remedy laws in this case can we request in this case we can request by the industry or we can start the Commerce Commission to look into this I'm just curious if the industry has started looking at this for tape for potential trading in by using this law mr. Paul do you know that I'm not aware of any specific efforts with respect to transit equipment or rail cars but the component parts thereof absolutely steel being one of the key values by ingredient in in rail cars and I was just in Granite City the the the other week and I've seen both the challenges with dumping and then also what can happen when you've taken some action and restored some some jobs there and what I will say and I think it's worth noting this that both BYD and CR are see made substantial requests for tariff relief from both the 232 in the 301 tariffs for equipment that they were bringing in to the United States and so this is where they granted those issues or they were they granted those they were not precisely because in the case of B Y DS requests virtually all of them were products that were part of the made in China 2025 plan where there's a very well laid out set of objectives that the Chinese government has for for industry domination it's there for everybody to read but this is it this is an emerging threat and as you indicated in the steel market now the global steel market is so distorted by China that is almost unrecoverable China makes half the world's steel it doesn't consume that much and five out of the top ten companies in the world are state-owned enterprises they don't play in market conditions it's completely wrecked the steel market around the world and you see CRR C doing the same thing now in the in the rail space where they were again they were a bit player 20 years ago they are by far the most dominant rail company in the world Bombardier and others are small play now compared to China and BYD again the ambitions of BYD are to become the look the world's largest automobile maker and we have the luxury right now of not seeing a lot of imported cars from China that may soon change have you thought about bringing those anti-dumping challenges to the WTO to the WTO no I find the WTO to be slow and incredibly totally inefficient from a domestic perspective I think we'd want to look at the market conditions to see if that is in if there is in fact a case because as you know the criteria are sometimes lagging and complicated but again the component parts some of the component parts are already subject to specific dumping orders or tariffs because of that unfair competition is there a way that you have been able to see where we can enhance those through law or does existing anti-dumping language we have suffice know those laws need to be improved they need to be improved dramatically and there needs to be first the opportunity for a the Commerce Department to initiate more cases there as you know they're expensive for the private industry there needs to be a much more early warning activation system and and you've seen with this administration a lot more executive action that's being taken as well and so I don't think that that that authority should be restricted in any way in fact I think the federal government should be much more assertive about standing up for the interests and rights of its domestic industry okay one real quick questions I've got just a few seconds left by America would it apply to the transit projects that receive federal federal dollars are they do you feel that this is being manipulated to make it look like they are not receiving federal absolutely the Buy America laws need to be reformed the Chairman briefly mentioned this with respect to advanced batteries there's a new kind of standard that's been proposed in the UM CA that's us MCA that's worth looking at to get more of that battery content into the North American specifically to the US more market and also the CRC and BYD claims with respect to to buy America they should be audited the inspector general's report in Albuquerque indicates that there is very clearly the possibility the byd is not fully meeting its Buy America obligations Thank You mr. Pope mr. Chairman I yield back representative spi Thank You mr. chairman and thank thank you to all the witnesses for your testimony today this is a very important conversation that we have in today I also sit on the Foreign Affairs Committee and just last week we we held hearings about China's influence in the world particularly developing nations and in Latin America and there they're building ports they're building rail they're building all kinds of transportation and infrastructure projects and of course when you have control of the port's there's no telling what will go through them they're also looking to control Facebook facial imaging and data and so they I think they're very crafty and they're our foxing us and so here in the US we have to be mindful of ways in which China's under money not only our competitiveness but also our national security Chinese state-owned enterprises have been have made it their goal to corner the market in terms of infrastructure whether it's ports or rail and their involvement in constructing rolling stock is of particular concern to me coming from New York City where we have the largest transit system in the country FTA regulations require competitive solicitation of rolling stock contracts to the maximum extent feasible but in many cases because of Chinese SLES dominance transit and commuter rail agencies end up having few options to choose from I'd like to ask mr. Washington whether he has experienced similar problems in Los Angeles and I would like to ask the other panelists what they think Congress can do to promote competitors in this area this is a real issue for as much as we can talk about it I think we need to develop a strategy to derail them no pun intended mr. Washington well thank you for the question I hate to hear the word derailment in my business but yeah there is I mentioned we had two bidders on this particular contract for heavy rail vehicles we also have contracts with other rolling stock providers namely kinky Sheri Oh Austin Talgo and so there are some not many that we have to choose from in our case we have proven in Los Angeles that these are again best value solicitations so we're going to look at them very very closely to determine not just price but a number of other things but there's not many players which kind of other factors you will you be looking at besides pricing the program management the past performance delivery of the rolling stock vehicles in our case the local employment plan what do they plan to do locally in terms of training local folks in the community those kinds of things anybody else any other experiences across the country I would just add sir I'm just on the electric bus space which is different than the rail side I think right now the electric bus space is actually the most competitive is bus market right now compared to diesel or CNG there's four legitimate OMS that are submitting competitive bids into technology getting better and better for example in New York City they've got ten buses up and running five of them are with New Flyer if I wasn't worth portare BYD submitted a bid was not selected but there's a open and robust competitive process going on now on the electric bus space which is leading to cleaner buses getting out on the roads around the u.s. Thank You mr. Chairman I yield back thank gentlemen a representative Gallagher Thank You mr. chairman mr. Sulu foe could you explain in simple terms to the committee the connection between transportation and telecommunications in other words why is 5g and the internet-of-things such a crucial part of this conversation on rail and public transit security well thank you Congressman Gallagher and and I mentioned briefly in my oral that the highways and and vehicles of tomorrow are going to be paved in silicon as much as they are in asphalt and and that is the reality ultimately when you think of 5g it's going to be the hub that you has so many other spokes that will connect not only transportation basically all of our lifeline sectors and critical infrastructures so if we get that wrong we are really building some of the most sophisticated networks and infrastructure on very weak foundations so I think that the president was right in promulgating the executive order last night to prohibit in essence Huawei and ZTE from engaging in the market in the United States and I might note Australia has already done so so I think from learning some of the hard lessons they learned on the rail side that could have had some of the that could have factored into their decision-making on 5g I think part of our challenges these threats while real sometimes we talk about them in abstract ways could you give us perhaps some real-world examples of how a smart train or public transit could be compromised or weaponized yeah so I mean I think it was general Adams who brought up some of the examples in terms of Wi-Fi and and and and we talked a lot about security but there are legitimate privacy issues here too given the use of technologies to monitor individuals so I mean if you can get into the system it really does hinge around what the perpetrators intent is so if you're exploiting Wi-Fi which is just one of many avenues to be able to get into a system you can cause some significant harm I'm more worried from a national security standpoint if you talk about switching and if you're talking about rails and and that's where it goes from a security concern to a genuine national security concern and and you know I know an amazing and incredibly thoughtful chairman of an important Commission that I hope can take some of this on and the solarium Commission so I would ask you to elaborate on that general I want to get to you one second but mr. Khan first if I have time if your company was asked to conduct espionage in any form under the 2017 national intelligence law on American citizens using your products would be why do you comply you Eddie Motors would not comply a new idea to extend my knowledge but he would not comply with what recourse would be why do you have if the Chinese Communist Party sees their assets under the 2017 National Intelligence law thank you is your understanding that the judicial system in China is independent of the Chinese Communist Party or subordinate to it I'm not I'm not an expert on the judicial system okay in general Adams just to circle back to with the time remaining what I asked mr. Sulu fo about could you sort of add to what you've already laid out in your testimony real-world examples of smart trains public transit threats any drone threats that you see transportation going forward helped us really tease out that connection between the future of the Internet and the future of transportation one of the things that we want to do with our industry and its vulnerability to cyber intrusion for example is reduce the attack surface specifically we know the Chinese have technology such as facial recognition technology and intercept technology if we want to let them make our rail cars transit or Freight we're going to expose ourselves to their intuition using facial recognition technology now I have to I've commuted to the Pentagon a lot over the past 40 years I don't want to be I don't want my my face recognizer getting on and off or any any others who serve their country every day whether they're uniform or civilian clothes we don't need to have Chinese facial recognition technology on a rail car Transit rail car going to the Pentagon or anyplace else in Washington DC or I would large that to Boston or LA or Chicago or Atlanta but we've we've got to be reducing our attack surface all the time and because they will exploit it thank you and I'm gonna run out of time and I apologize for we have a very vast number of witnesses here so I can't get everyone but I Thank You mr. chairman I think gentleman for his questions but that representative already well thank you mr. Chairman I want to thank you and the ranking member for holding this important hearing I'm also a member of the Foreign Affairs Committee and as it's been mentioned we have taken a close look at Chinese actions around the world recently and I'm happy to see a second close look at Chinese economic expansion to our own industries seriously now and I wanted to say that I welcome the legislation introduced by my colleague Harley ruda I my fellow Texan John Cornyn and the Senate the transit infrastructure vehicle security act prevent in federal funds from being used to buy Transit rail cars or buses manufactured by Chinese owned companies I welcome that and look forward to supporting that and I want to recognize Trinity industries which is here today which is headquartered in my hometown of Dallas and it's provided good-paying American jobs for 85 years and is a leading manufacturer of rail car products and services in North America and I want to begin with mr. Cohn here the United States is a top exporter of technology products and services an industry powered by innovative forward-thinking entrepreneurs and a robust network asan the world's top research institutions in your written testimony you mentioned that some of the partnerships byd has made with community colleges and localities to diversify and bolster its manufacturing workforce as BYD also partnered with any US research institutions to develop products sold within the US thank you for that question I think that's a really important thing that a lot of OMS are looking at we I don't believe we've worked with a specific research institution but we have worked with startup companies as I mentioned earlier on the inductive and wireless charging space we're the only OEM that's got a number of projects where we use wireless charging as a way to increase the range of our electric buses so customers don't have as much range range concerns as they might otherwise so those are two companies that came out of the u.s. one out of Pennsylvania one out of out of state of Utah where actually used to work but they these are companies that are now being able to take the technology that they worked on with BYD and sell it to other other agencies but also abroad and bringing to other areas such as the port environment and other areas where they operate that's technology that if there wasn't an OEM partner those companies would have had a lot of trouble raising funding and developing their technology so it's been a great partnership that creating that competitive innovative space that that you that we have right now in the electric bus space in the US has been vital for that okay one turn to general Adams very quickly on your testimony you describe the deep ties between CRC CR RC and the Chinese government and my question is what CR C be able to resist an order from the Chinese government to take them a level in action against the United States rail system sir if I understand the question correctly would the CRC take act take orders from the Chinese government that's right no question about it they're already doing that and that's because the not only is a directorship interlinked but they're required by law to solicit the opinion of the Chinese Communist Party for any decisions regarding company operations well I'd like you to elaborate a bit my colleague was just asking you about this as well the statements you made your testimony about the Chinese dominance of the US rail system would turn the system from a bedrock strategic asset into a potentially crippling vulnerability for us if you could elaborate on on your thoughts there just a little bit yes sir real especially freight rail is the major way we move military supplies within the country it's also the way we deploy military supplies from the bases in the country to the ports for deployment overseas we couldn't do without it we move tanks we move trucks we move everything that's of military significance that requires transportation because rail is one it's effective in two it's the least expensive way to move things in the country that's a great asset for us but if China were to make our rail cars if China were in control of not only the rail cars but the system itself that would turn it into a strategic vulnerability because they would be able to monitor our movements they would be able to receive advanced indication and warning of our movements they would know what our plans were by knowing that in detail what's on the cars so instead of something that would be to our benefit it would be something that we would be giving the enemy potential adversary I should say a warning about what we're doing and they would be able to monitor our movements well in the Foreign Affairs space I think we're seeing a change to great power competition and I want to come in this committee and bipartisan approach that we're having to this to try and counter what I do see as you know a new competition for us something we need to be keeping our eye on I don't want to stifle innovation I still want to have you know have trade and bring in new ideas but I think this is something we have to keep an eye on I want to thank you for your testimony and for helping share this with the American people today thank gentlemen representative Alderson Thank You mr. chairman thank you all for being here this morning my first question is for mr. Paul and mr. Galloway as noted in your testimonies the manufacturing of public transit freight rail cars and rolling stock employ over 21,000 jobs an American middle-class workers some support nearly 190,000 jobs here in the United States right now CRC is consistently bidding 20 to 50 percent lower than non subsidized private sector companies do you believe that once CRR C undercuts all other competition that their current assembly jobs will be kept in the United States I perhaps in name only and that's the situation that we're operating under now mister bolzen is that there is a there is finally as there is final assembly occurring in the United States turning the screw adding very little value adding some value but a lot of that content is coming from Chinese imports in the process by CRC under bidding all these other firms and again many of them have foreign investment but they have to operate under market conditions they're driving out competition and what any economic textbook will tell you once a firm achieves a monopoly and/or a monopsony the price is going to rise the quality is not necessarily going to prove and ultimately the victims of that are gonna be transit riders and transit systems when there isn't that robust robust competitive system in the United States the Australian example is a good one because Australian had a domestic rail industry it now has virtually none 95% of the market is controlled outside of Australia in fact the one Australian firm went to China to make its products and bring them back in so we are not Australia but I think there's a lot of lessons to be learned there and it's important to remember that most of the jobs in rail assembly in rail car assembly are outside of those assembly facilities they're in the the steel the the wheels everything else that goes into making that vehicle that is where the preponderance of jobs are and so if you have a company like CRC that does not necessarily committed to that domestic manufacturing footprint into expanding it you're gonna cost jobs in the supply chain thank you mr. Galloway would you like to add yeah I'll just add a couple of notes I think it's it's important and I agree with everything mr. Paul has said I think the the key to understanding some of the potential disruption here is the fact that the the US domestic rail car and rolling stock manufacturing sector has very very deep supply chains within the US and it covers every state and it covers hundreds of congressional districts and so there's there's a lot of value that's being retained here in the US and that even includes the private sector foreign owners of rail rolling stock manufacturing they've made significant investments here in the u.s. in their own domestic splay and our domestic supply chains so that value is being retained the problem you're running into now is when you have a foreign SOA that's coming in here and they're disrupting that by pulling that that that value add supply chain out of the US and moving it back to their home country because they're not making those investments into the US manufacturing process that's where you're going to find a lot of that that huge amount of disruption but I'm going back to my earlier comments even under the the existing Buy America provisions you're still fighting a net loss under SOE type of market activities and conditions okay thank you and mr. Paul my last question to both of you also but you kind of touched on with the Australia issue if Chinese state-owned enterprises are ultimately successful in driving out and undercutting our competition competition just like they did in Australia how long do you think it will take for America's rail car manufacturing industry to bounce back obviously there's a lot of factors that go into that you know public investment and many other issues but the road map is pretty dire and and we've seen what has happened in other industries of the United States that have been targeted through the five-year industrial plans or the made-in-china 2025 and as I mentioned in my testimony this is the tip of the iceberg the procurement market is not insignificant but the more significant market I think for these companies is the US automotive market and that is of serious concern because that is the very heart of American manufacturing one out of about every eight or nine jobs is connected to auto manufacturing in the United States and so I look at the playbook and I am very concerned unless unless the committee and the Congress take some action Thank You mr. Galloway do you want follow-up or you're fine I'm good thank you very much mr. Chairman I yield back my remaining time the two seconds representative wrote him is he here okay oh there is why not sorry yeah I got hardly your way down there and I forgot we have so many rows Thank You mr. chairman and thank you chairman and ranking member for holding today's hearing on such an important topic and for their help and guidance in protecting American manufacturing jobs I recently introduced the house companion of s 846 the transit infrastructure vehicle security act tips that would prevent Federal Transit dollars from being used to procure Chinese transportation assets the free market principles of capitalism are how the United States of America became the most powerful country in the history of the world yet we know non free market economies in their state owned enterprises SOE are a direct threat a national security threat to our country's commitment to fair and open competition why because SOE undermine free markets by benefiting from government funding and preferential treatment to undercut the competition as part of the made-in-china 2025 initiative China has dramatically underwritten its rail and bus industries to the tune of billions of dollars through direct funding and other subsidies as this committee considers aggressive investments in our infrastructure we must ensure we are not investing in rail and bus stock that could jeopardize our national security or disadvantage companies based in the United States who operate without the benefit of billions of dollars of direct government funding I support fair trade as do all the members in this room and on this committee but there's nothing fair about forcing American rail and bus stock manufacturers to compete with companies who receive billions of dollars from their government in order to win contracts in the United States and American tax dollars should not be used in that in that means I'm proud to work with a bipartisan bicameral group to introduce legislation to hold China accountable because we need to do all we can to support American workers and American made products I'd like to thank representatives Ryan Holmes Norton Garamendi Crawford Perry Granger and Weber for joining me as original co-sponsors of the House version of tips a– and i also want to thank senators Cornyn Baldwin Brown Crapo and Shelby for their work in the Senate a few questions I'll start with you mr. Galloway Australia's freight rail car manufacturing has all been decimated but decimated by what's taking place there with the Chinese SOAs is that correct that is correct and and I think I read somewhere that we're looking at 65,000 American jobs could be at risk if we continue down this process and if you want to take that question or the general as well our our research at Oxford economics confirms that the the freight rail sector just as the sector went in itself no stat sector alone this freight rail car manufacturing correct is that direct and indirect jobs that would be indirect direct indirect and induced effects that's correct what's the cost GDP the cost of GDP it's in my notes it's I believe it's about seven or sixteen billion dollars I don't have it on hand but it's significant can you talk about what the ripple effects are through our economy if we use American tax dollars to fund SOS the impact of losing those jobs losing the seven billion dollars of GDP and what the ripple effects would be through our economy yes so the the ripple effects would be substantial because the you're dealing with supply chains that are domestic so you have suppliers of all sorts of parts and components systems and subsystems that are manufactured here in the United States it's those jobs there are strong middle class middle income jobs in the u.s. that would be displaced as a result of foreign competition they'll be coming in and under pricing in taking that market share away from good corporate citizens and producers of products here in the United States and mr. Paul what's a total level of direct investment by the Chinese government into these SOE the value of the 51,000 Chinese state-owned enterprises is 29 trillion dollars the amount of money they receive is almost incalculable because it's through every policy aspect that you can imagine from preferential tax treatment low-interest loans a protected home market labor and environmental regulations that aren't that aren't complied with domestically a misaligned currency from time to time and the the well established technology transfer and intellectual property theft and so attracting the R&D and development is is is some is is well below the cost of doing that in the United States and so it is a it is it is the world's largest racket and if China chooses to do that I guess that's the Chinese government prerogative but there's no reason whatsoever why American taxpayers should have to subsidize that which I'm so I'm glad that you introduced the legislation we're proud to endorse it so so American companies and any companies that follow fair and free trade and in a capitalistic process you invest money you you you have revenue you have expenses and you have a return to shareholders yet these SOS don't work under those rules right there is no obligation for return to shareholders in fact by making these massive investments in these companies they can underpriced any other company out there in ways that is absolutely impossible for us I know that unless may look very passionately about the issue but he is over time and he Thank You Herman I yield back I thank you and I would turn to representative Palmer Thank You mr. chairman thanks for holding this hearing mr. Washington how much lower and dollars was the CR RC bid vs. Hyundai I believe that was 640 about thirty five million dollars sir what would that be as a percentage of the the difference put that in percentage terms what percent lower than Hyundai I would say probably about between five and ten percent or so given what we've heard today I'm amazed that we're even having a discussion about doing business with China general Adams a commander of the u.s. southern us Southern Command says Beijing is using this information and debt diplomacy to help Maduro hold on in power we know that they that she is pledged two hundred fifty billion dollars in investment and them structuring energy infrastructure in Latin America there they there was this scandal involving a company called Eau de Becque that they've taken over their projects in Colombia Peru Brazil the Dominican Republic does it make sense to you that that where we would allow China to come in you've already made the case I'm just gonna ask you to repeat it for the how problematic this could be and how strategic it could be for for China to get into our freight system sir thank you for bringing up to the foreign element of this and the influence element of this because one of the ways that China does make its influence known in the world as they work in areas that need their technology that need their financial support and then they use that as leverage for all sorts of things you know I had part of my service was in Africa and this was 15 years ago there's 10,000 Chinese owned companies doing business in Africa today in there and every sphere you think of infrastructure energy small medium-sized businesses telecom they are assiduous about developing influence in the developing world they know that they're that they that the developing world wants their help and they can provide it at a cheap cost and develop as much money as they want it's a very important point of leverage for them to have these friends and these influences in the developing world sir if I may the other part of that is what they do when they buy these when they buy this influence is they develop the supply chain entirely in China right the Chinese are masters of vertical integration they want not just the sell their goods they want to make the goods in China and if they can sell to the developing world they're not going to put they're not going to put the supply chain there they're gonna keep it back in China which means that they grow their industry with Arde intellectual capital basic research and it's once they've got the industry they use that again for this for global domination but they've got partners that are playing in this game with them as well where they they might not manufacture the steel pipe or what it is they're sailing they'll provide the material to do that and and say Thailand or someplace like that and and not have to pay any duties on it so they have these these agreements that are undermining not only our interests but the interests of other countries I want to move to you brought up the technology sphere and I and my concern too is when we're talking about China's expertise and building these electric vehicles and others how much of the technology that that they're using is pirated from the United States great question because I mean if you look in totality and I think it was mr. boss who brought up the question earlier about steel the first big indictments were about five years ago where you had five POA military officers indicted by the US government and they were using state-owned enterprises to achieve industrial and economic espionage when we start looking at autonomous vehicles that bad that is so critical to our society to our country and the great state of Alabama and and and and and and elsewhere so we need to get that right I'd be willing to bet you if you if you were to look in context that it's not all originally made in China well I go back to my opening comment about why we're even happy even having a discussion about allowing China to play in our per 8 space considering how we I think been asleep at the wheel to a certain extent with them having control of the Panama Canal and and other strategic footholds that they've established in Central and South America thank you for indulgence mr. Chairman I yield back gentlemen first questions that represented Fletcher Thank You mr. chairman and thank you ranking member graves for holding this important hearing today thank you to all the witnesses for taking time to testify it has been clear here from the testimony today that these state-owned enterprises Chinese state-owned enterprises have an unfair advantage in the bidding process for public rail projects and that we have a role situation on our hands of addressing a number of potential impacts as they continue to be engaged in this market certainly if they can corner the market and drive domestic companies out of the business we may not see these savings in the long term that we're seeing now in some of this bidding and beyond that I think that there are a lot of national security and other concerns that your testimony has raised and general items I wanted to ask you specifically your in your written testimony you explained that the contracts that the CR are c1 for the u.s. metropolitan transit projects include the delivery of trains that contain Wi-Fi systems automatic train control passenger counter surveillance cameras and other technologies that will be thoroughly integrated in an era where Americans are increasingly concerned about privacy and data privacy and artificial intelligence can you talk a little bit about how the Chinese government could use some of the advances in artificial intelligence and facial recognition to extract even more value out of its investment in the u.s. transit systems thank you very much the point of having technology on our trains is ultimately efficiency and safety which means that we welcome the inclusion of technology in our transit system trains in our freight rail trains we want more of it not less we're not Luddites we like technology China knows that too and in fact their technology is advanced they're not as good as we are but they're very good and they know that they can answer our requests for proposal for building transit rail cars in particular like LaMotta is soliciting they know they can satisfy that and we want those requirements to be satisfied but we don't want to as I go back to we don't want to enlarge our attack surface and if we allow them to build the cars that have this advanced technology we're exposing ourselves to the maximum amount of intrusion that they could ever and they'll do whatever they can they're very interested in tracking the movement the cars they're very interested in tracking the people that are on the cars when it comes to transit rail it's a clear problem for Washington DC because we all ride the Metro but when you talk about the freight rail system I think the problem it gets even more intense because we're talking about tracking the movement of sensitive goods hazardous waste toxic chemicals and so forth we don't want to let China know where those cars are if they go into a high-threat urban area for example the last thing we want is for China to manipulate the controls on the hatches either give a false read or give a spoofing read so that we think the hatches are open or closed they can do whatever they want if they have the control of the telematics on the rail cars so to sum up the exposure that we have to technology is something that we actually welcome however we at the same time we want to make sure that we don't want to have an attack surface that a potential adversary could exploit and just as a follow-up what kind of safeguards if any do we have now to prevent that information from being utilized or what do what do we have in place we do have standards for cyber security and I think we need to strengthen them and and because so much of the so much especially the transit cars are property or bought by the local and the state governments we need to help the state and local governments develop greater tighter cybersecurity standards so there's a lot of work to do on that certainly I that the tips a bill is important because the best way to manage risk is to avoid it we don't want to use federal dollars to purchase Chinese rail cars let's avoid the risk let's not let them do it thank you very much I yield back my time I think I think the gentlelady would now turn to representative Catco Thank You mr. chairman and thank you all for being here unfortunately this is a concern that's compounded by the cyber threat and I'm well aware that for my ranking member on the Homeland Security cyber committee and it really is stunning to me that number one we are do not we are not good stewards of our cyber systems in the United States and we don't always anticipate the vulnerabilities and then we compound that by taking one of the baddest actors in China and giving basic free access to know the movement of millions of people and all the implications that has so I'm very concerned about that in my previous life way back when I started out as a lawyer I was an antitrust lawyer and this sure sounds like predatory pricing to meet a price I brought you out of the market and there sure sounds like they're dumping in our market to basically products because of state support in government-owned entities but I want to focus on the cyber threat and all the threats and I want to use a case example from something that's going on right now and that is what they're doing in New York City Governor Cuomo announced in May of 2017 that the MTA would launch the genius transit challenge a grant program to challenge companies and individuals to develop innovative solutions to improve New York City subway system a march 9th of last year they announced that the winners of the grant program would include you guessed at CRC which invested 50 million dollars of its own fund funds to develop a new subway car for the MTA transit system despite the absence of any ongoing procurements the rail car would include modern train control technology Wi-Fi and other systems that could be susceptible to cyberattacks so mr. Sulu if he could start if they have time general could you tell me based on that fact scenario which is happening what your concerns are big big concern I mean firstly we discussed the the threat that China poses from a cyber perspective and and and quite honestly we haven't levied consequences or incurred cost for bad behavior it seems like we're doing quite the opposite if we're rewarding bad behavior with winning potential contracts in the United States so CRC has to be looked at in the broader context of what we've seen in other sectors in other environments and I think that that's important bottom line in all this is we've let the bad guys have run in the field and I think we need to change that you've done some amazing work historically as a prosecutor and and and and I do think we need to start prosecuting some of these bad actors but we need to bring other instruments to bear as well be those economic and in some quick cases maybe even military but at the end of the day we have yet to we've yet to articulate a deterrent strategy to dissuade deter and if need be compelled bad behavior and amidst all this you've got economic levers that we're just not minding the store so as a former New Yorker I really hope that we don't and general I think focus a little bit more I understand a vulnerable but focus more on this particular situation what could go wrong with the Chinese event with the Chinese rail cars in New York City in the currents of current fact pattern the most effective cyberattack is one we never know about and the sooner we know about it the least effective it is they have succeeded in flying under the radar to use another military term for a long time we don't even know the extent of their intrusion in fact the minute we find out about it is it going to be too late that's the problem that really concerns me we've already seen how they conduct business they conduct business under the radar surreptitiously without raising any concerns and again look at the glass half-full this hearing is a wonderful way to shine some light on the situation and I appreciate the questions but I think we need to be much more resolute and diligent even than we are today I think I know our intelligence agencies are working on the problem and I presume that you have heard some of their concerns I'm happy that they are and have great confidence that they're doing resolute work on this issue but we and the public also need to know that we're taking this issue seriously state and local governments don't have access to that information they're there making decisions sure in good faith but in the blind and I think the more we can tell about the incipient and in in insidious threats that we have from China and the way they exploit our technology for their own purposes the better off we're gonna be I thank you for back my seven seconds mr. Chairman I think the gentleman will use it wisely I have now turned to representative Bradley Thank You mr. chairman and thank you for holding this hearing on the impacts of state-owned enterprises in the transit and rail industry throughout my career in public service I have supported by America and by American laws in fact but consistently co-sponsored legislation to improve these laws and I continue to believe we must strive to do everything possible to promote jobs in manufacturing in our country and in California which is my home state Lancaster California is home to want to be why DS manufacturing facilities and employs nine hundred individuals Lancaster is very close to my congressional district and probably employs many of my constituents I've heard from the Sheep Meadow air rail and transportation workers unions that represent most of these employees and they have raised real concerns about the loss of jobs should be why D be prohibited from doing business with our local transit agencies I'm also concerned about how this issue relates to addressing climate change in California we've passed a new law requiring transit agencies to transition to zero emission buses by 2029 I believe we should pass similar legislation at the federal level and I've introduced the green bus Act to accomplish that purpose I hope mr. chairman that we can look to calibrate a solution as it relates to transit and to transit only to and to improve by America and I hope we can distinguish between bad actions of state-owned companies and investments that create good jobs and help us address climate change and mr. chairman I hope we can work together to ensure all these issues are fully debated and considered before moving forward and finally I would just like to say to my colleagues on the other side of the aisle China is investing in clean energies in the United States because China's leadership knows our cities and counties want to move to a clean economy and they want to move to a clean economy as quickly as they possibly can so let's be clear China's strategy fits very neatly into their made in China by 2025 plan to become the world manufacturing power in ten years so we need to take the lead on clean energy so I've gotten that off my chest and I will then ask I'd like to ask mr. Paul and this just question is directed at transit and not real is there a solution a calibrated solution that does not simply just require creating a new US manufacturing here in the United States it's a good question and I will say I come this from the perspective my background I was a CWA member a shop steward I represented workers at the afl-cio I have deep concern about the dignity of work and about the the future of work in the United States I think there does need to be a level playing field and I think that BYD is a corporate entity owes some answers about about some of its subsidies and what-have-you I do think that and I agree with you that electrification is the future and that we ought to be a big part of it and investing in it as well I think one way to achieve that goal is to have a is to have a robust infrastructure investment so that there are more companies that know that there is a sustainable large enough market for them to make long-term investments in their workers and capital in the United States and so I will say that I don't think it's a question of pitting the workers in Lancaster against everybody else we are all in this together and I did I do believe that there's a solution I also believe that every company needs to play by the rules and there's those rules need to be strictly enforced and do you believe in this notion of electrification being the future and that it is we're at a climate crisis and the quicker we can get there the better off I driving me and made Chevy may Chevrolet Volt I'm part of that I totally agree with you that electrification and other sorts of advanced energy forms and there may be some transitions as well but we have to get there as well I completely agree with you thank you very much I see my time is up so I will yield back mr. chairman thank you for the time I thank the gentlelady now representative Babbitt sir thank you so much mr. chairman this is a very very valuable and revealing hearing it shows just how serious the threat is not only in the transportation issue but many many other issues that our countries is facing thank you for having this mr. Sulu pho I would like to ask you a question I want to say thank you to all you witnesses valuable testimony but mr. Sulu pho I appreciate what you said in your testimony quote to undercut America's competitiveness is to damage the engine that powers our national security well said to allow the Chinese to undermine our otherwise well-functioning free markets undercut American competition and jeopardize our national security as a travesty and I become aware recently a foreign state owned enterprises attempting to enter into the US market of passenger boarding bridges and I personally have a number of cyber and data privacy concerns in response to some technologies that they're proposing like facial recognition and others so in light of that should the same concerns that are being raised about Chinese owned or subsidised freight and passenger companies also be raised in the context of other critical transportation infrastructure including aviation infrastructure Thank You mr. congressman without a doubt IIIi think it's important to look at it across all modes of transportation and even beyond because different modes of transportation are dependent upon critical infrastructures outside of that particular domain taking cheap take pnt GPS some of the timing signaling I think it's very important that you look at it beyond that and one thing on the facial-recognition piece that you raised I mean what didn't come up yet today was also they were the perpetrators behind one of the biggest hacks of all time of OPM everyone with security clearances match that up with fingerprints and then facial recognition you got a pretty big privacy nightmare on our hands absolutely all right well thank you so much in mr. Galloway as you know China's maiden it's made in China 2025 initiative targets ten major industries for global domination covering a range of critical industries such as rail equipment aerospace maritime equipment and many others China's plan involves far reaching state support for these industries offering government subsidies below market financing and a range of other tools to advance China's state-owned entities at the expense of domestic companies right here in the United States in your opinion what long-term solutions should the United States implement to respond to China's any competitive behavior I think the the challenge is long-term solutions really reside in getting the state-owned enterprises to conform to a good corporate behavior and level the playing field here in the US I think from from a policy perspective it presents a unique challenge because convincing a government to stop funding and supporting their their entities is is something that goes against what their objectives are here in the US and globally there are certain tools I think that you have as a congressional body in terms of helping to mitigate some of that either through certain protectionist measurements shoring up things like by America or using other types of tactics to target specific areas that are specifically susceptible to anti-competitive and disruptive behavior here in the US but I think a lot of encouragement for for direct investment in building out supply chains in in curbing the the types of subsidies and other concessionary financing and activities that the state-owned enterprises are actually doing here and globally is really the next step I think that's well said and do you do you agree with some of the initiatives that the bread that the administration is currently there and there are negotiations with China to try to try to mitigate some of these problems that you just said I I do agree with some of them I think the the issue is is holding firm and keeping a close eye on focus on ensuring that the provisions that are attached to those types of engagements in those types of policies are enforced and in there they're well designed in order to protect and preserve the sanctity of the supply chain systems the competitiveness within our own domestic economy absolutely and I'm running out of time I could ask a lot more questions but I'll yield back what is it 11 seconds I thank the gentleman we again we will spend it wisely of representative Payne Thank You mr. chairman and thank the ranking member for having this hearing today mr. Sulu pho as you may be aware in New Jersey is the home my district has been described as our two most dangerous miles in America because of the chemical installations seaport airport rail and interstate all come together in a two mile radius what do you see as a potential cyber and cyber threats to the area because of rail cars manufactured by state-owned enterprises and what can be done to ensure its safety Thank You congressman that that's an excellent question and and when when I highlighted the national critical functions earlier these are 55 designated issues that if if denigrated could have a debilitating effect on our national security economy and and the like and industrial control systems whether from the chemical side or from other sectors share common vulnerabilities and that's something that we would call a single point failure so I I do think that what we need to start doing is racking and stacking because we can't get our arms around everything all the way all the time and the last thing we want is the spread the peanut butter approach where everything's even we've got to get the most important issues addressed first and I would put chemical and I would put obviously Transportation on that list along with a handful of other financial services defense industrial base telecommunications water and the like so I I do think that that is an important set of issues and and from a rail from a movement absolutely that's something you should be concerned about mr. Galloway the u.s. is in a you know dire need obviously of robust investment in our aging transportation infrastructure if this investment goes to rail cars manufactured by state-owned enterprises would would that impact the effectiveness of the investment and how so if I'm hearing your question correctly if it's going into freight rail car manufacturing that would be completed by state-owned enterprises the the disruption would be significant and earlier my testimony and what we have actually researched at Oxford economics even 1 billion dollars in freight rail car manufacturing that will go to a state-owned enterprise and keep in mind 1 billion is only a fraction of the size of the industry you're looking at a potential loss of 5,000 US jobs good-paying US jobs as well as 1.3 billion dollars in u.s. GDP because that value ripples through the economy because those supply chains are here and you're keeping a lot of that that economic value retained here in the US that's going to dry up asking to go overseas and with those figures and statistics and jobs continue at that level to if the investment would continue at that level yes it would and and you can look at this as an additive effect it would double if it goes from 1 billion to two billion it would triple from going from 1 billion to 3 billion and and these are annualized figures so as as that investment would continue that same disruption and that loss would continue thank you and chairman I'm gonna yield back a minute in 15 seconds thank you I appreciate that representative lamothe oh I appreciate it mr. chairman thank you witness has been a full full length hearing here with many members I just narrow my questions down a little bit here to issues security mr. Sulu foe bottom line on the amount of data that a Chinese company can be collecting on our transit systems there that is that that's fully expected to be sent back to mainland China and used in their Intel systems right and we fully expect that that's gonna be that is a major concern yes as general Keith Alexander then director the National Security Agency referred to it as the greatest transfer of wealth in our history there's no reasonably that that won't happen no reason I mean obviously you want to agnostic to everyone you want to put in all the right security controls you can and standards and and most importantly here's the reality that threat move so fast technology changes that you've got to be testing your systems all the time red teaming and looking for vulnerabilities don't expect I mean if you if you legislate a law right now that tries to handle security itself not the importance of security it's gonna be out of date by the time the ink dries so you want to consistently probe and test our systems and and that's maybe where the mandate should be do hack – hack proof them etc as much as you can hack proof them yes or at least minimize the impact and consequences when the inevitable occurs they are hacked but if we're bringing them in to be the manufacturers and installers of the job yes then they're they have free access they don't have to hack okay thank you mr. Paul when we're talking about you know rail cars for example any product built in China that were ostensibly start to be built in China and only assembled here let's talk about rail cars and I'll also sort this to mr. Washington as well what kind of you know bottom line if if the if the bidders are looking for savings involved by using Chinese made products as over american-made what kind of savings percentage-wise or dollar-wise are you looking at for a transit rail car what are you really saving at the end of the day and I come from Northern California where only a couple of hours for me is the Bay Bridge which you know the cost overruns on that right or something else but also immediately as it as they're building it or immediately after it was deemed ready they're talking about quality issues with bolts and type of metal and the way it was a way the metal was initially manufactured so you know to compare all those things please well and I specifically remember the Bay Bridge example because California taxpayers essentially subsidized an enterprise in China and Chen Jen to begin a bridge building exercise that resulted in cost overruns and delays and ultimate didn't deliver what it promised with respect to CRC I know people that won't drive across the bridge yeah I mean yeah I'm not scared but in addition to the traffic the safety yeah so so CRC entered the US market a few years ago first in Massachusetts and it won a contract after combining with another company that was another Chinese owned company was disqualified from from the from the bidding process and it undercut every better it then quickly secured contracts in in Philadelphia and Chicago in Los Angeles and I think the the representative in Los Angeles said that you know the bid was it was could have been 10% under in some cases it was tens of millions or even hundreds of millions of dollars less than the next lowest better and CRC was able to do this because it's a loss later this is not a profit-making enterprise this is a tool of Chinese state power designed to build an industrial capacity and dominate a market I'm you know I'm out of time here real quickly so bottom line what do you and then mr. Washington how much what initial savings for those that are tempted by that bid would they see just a few seconds please them on paper rough would be up to 30 or 40 percent that may not be the case down the road as youth management but it is you it can't be quite sizable okay mr. Washington please yeah I would just say that first of all current federal procurement rules don't allow public agencies to disqualify a CRC or an SOE or an SOE influenced agency I would also say and I mentioned earlier that the Delta between the CRC and the second bidder was between five and ten percent it was actually three point five percent but I think in our case that savings of that Delta was not very big not what not very large three point five percent okay very very little okay mr. chairman thank you I think gentlemen I just got to do a little editorial comment at this point since you raised the new Oakland Bay Bridge when I chaired the surface transportation subcommittee back in probably owe 8 or oh nine I held a hearing on that procurement and we had the successful bidder sitting right there and he had been the US side and the China side and I said to him well how is it that you know do they have the capability of building this bridge in China I said I'm not aware that in you know because of the innovative design he said oh no no he said I can build a factory over there and I said to him well what if I tightened up the Buy America he said oh I would build that I did the factory here that's on the record I mean it's pathetic what we've done with that representative malinovski Thank You mr. chairman as a predicate to my question let me let me make a couple of comments first of all China is setting up the most sophisticated surveillance state in human history if you live in China particularly in a sensitive area we're at a point where the government is essentially tracking your movements 24/7 through apps installed on your phone and of course surveillance cameras that are everywhere with facial recognition that's getting better and better number two we're seeing that China among other countries is increasingly brazen in extending the tentacles of its repressive apparatus to other countries just last week we saw Amnesty International couldn't rent office space in New York City because the state-owned Chinese state-owned enterprise owned the building and and told them no in New York City we had a Canadian Member of Parliament using a WeChat page to communicate with her Chinese Canadian constituents and her messages were her posts were being taken down by the Chinese government in Canada more to the point we have thousands and thousands and thousands Chinese Americans living in the United States many of whom have taken refuge in this country many of whom are dissidents their critics of the Chinese government and in the last couple of years more and more reports of Chinese agents in the United States directly confronting them threatening them of course threatening their family members still back home in China so these are people not hypothetical these are people in the United States that are persons of great interest to the Chinese government today the general I wanted to ask you describe how China could use the fact that it is manufacturing train rail cars investing in mass transit in the United States to follow these people and enable harassment of these people I'm sure that it is the case that one of the most interesting demographics in the United States for Chinese intelligence is Chinese expats American citizens whose families come from China Americans who have immigrated from China and are now contributing to our economy contributing to our society welcome American citizens I'm sure that that's one of their targets and they would have an interest in tracking them increasingly in real-time to the extent that they they can and of course Wi-Fi signals intercepting communications and so forth it's like putting an antenna for their intelligence collection systems in every major city in the country assuming that this demo this dynamic continues but they've already got those in 10 a in some of the largest cities in our country and I'm sure they'll use it for that if I may strategically one of the hardest things to do you have to know the capabilities of the adversary the hardest things to do is to find the intentions of the adversary for us as well as our adversaries we look at each other all the time China is developing the capability in bounds to collect against us to collect against whatever targets they want giving them attack services of our transit rail cars is a gift to them the same thing with freight rail much more strategic much more logistically challenging for us because again it's our strategic asset but we need to and that what they really want to know is our intense and if they the more detail the more fidelity they have let's say on the Chinese American demographic let's say on our demographic right here in this room the more detail they have on who we are and what our intents are the more pull their Intel picture of the United States is going to be well that's a problem yeah that's the national security risk and what I'm suggesting is that there's a very real personal danger to to people living in the United States who are American citizens who have ties to China and this of course could perhaps extend to other dictatorships China is the head of a club of autocrats and could share this intelligence with the Egyptians the Pakistanis others who may have similar interests the the ultimate question for me then is what are the safeguards if any are there technical safeguards short of simply not allowing Chinese investment in these sectors that would enable us setting aside the economic questions that you all raise but looking strictly at the national security and privacy concerns are there technical safeguards that could be applied to the importation of rail cards buses automobiles which we haven't mentioned that of course could pose similar concerns or is the only safeguard simply not accepting the investment if we want to avoid the risk then we need to not accept the investment if we want to manage the risk then there are some things we can do short of prohibiting it we have we have techniques that we can use to mitigate cyber security vulnerabilities but we're going to have to manage it no matter what whether it's completely cutting it off or using the technical measures that we have to detect transmission of signals for example but again the best way to manage risk is to avoid it congressman can I add one very quick point to this very very quick and I've got a flight to catch so I do so of my own peril here but the reality is is agnostic to the perpetrator we have a responsibility to do more from a cyber security standpoint because that attack surface is growing exponentially whether it's China driven or anything else so I would argue there are a lot of steps that can and should be taken I just don't want that heavy regulatory hammer alone to be driving all that we need to test their vulnerabilities and test systems within systems Thank You mr. chairman as as you know and those who have followed my time here in Congress Make It in America has been my theme multiple pieces of legislation over the years and more than enough talking well maybe not enough talking we've been somewhat successful we've increased the by American percentage for the highway transit to I think could be seventy percent I tried to cut back on some of the loopholes that are there we have a piece of legislation before us today mr. Otis legislation that goes directly to the heart of unfair competition the Chinese state enterprises has been discussed repeatedly by members as well as our witnesses make it very very clear that competing with the state-owned enterprises in China is not a market-based system has nothing to do with that and as long as that system of state-owned enterprises exists we need laws here in the United States and no you cannot enter the American market now much of the discussion that the president's engaged in with tariffs and misses this key point and frankly to be better off dealing with it directly as the legislation mr. Rudess legislation does I do have a couple of things that I want to bring out we do have laws we have the Clayton and the Sherman Antitrust Act there is a right of private lawsuits that could and should be brought by those that have been armed by the unfair predatory pricing I would suggest that there is a triple penalty so if you find that that's cost you $1 the penalty can be three dollars I'll take a look at that secondly this is a question from mr. Washington I think you dealt with this at least in part and I want to come back to it do the federal transit procurement rules allow an agency such as yours to reject a bid due to cyber security concerns saved by the Chinese state controlled company like CRR see they do not currently the federal procurement rules don't allow public agencies to disqualify a in this case a CR C or a b yd my knowledge only Congress can do that and I would excuse me please complete and I would just also add one thing transit agencies need guidance in this area because the increased need for rail cars in many of the areas around the country as referendums are being approved is upon us I appreciate that and it sounds like there ought to be a law and in fact there is a law at least goes part way towards dealing with this and that's mr. rooters law that says that if the cyber security concerns cannot be addressed then that particular company or that particular bit must be rejected and so it does go directly to that and I draw that to the attention of those who of us who will be voting on this eventually and I'm proud to be a original co-sponsor of that legislation my final point really deals with another piece of legislation that we're dealing with and that is to extend the Buy America requirements to the entire infrastructure package that may eventually emerge from this committee and so it's everything from pipes to pumps and broadband and other activities that hopefully will be part of a very rich and successful piece of legislation apparently the president is going to suggest how we might pay for it that would be helpful but along the way that bill has been introduced by will be introduced by Senator Baldwin over in the Senate side and I'll be introducing it here on site in the next few days draw the attention of the committee and anybody it's interested in extending the buy American to all money that the federal government would be spending on infrastructure writ large a most unusual event I'm yielding back time I thank the gentleman I just take the opportunity on his time to say you know I'm determined to you know we I got us to move from to 70% American content but I was not successful in getting amendments to how you classify components sub component systems etc etc very complicated but clearly the loophole that BYD is using in this case to get to the value that theoretically they are eligible so I really thank the gentleman for his initiative and there's some very specific places where we need to apply that that I'd turn to the gentleman mr. Johnson Thank You mr. chairman um mr. Paul your testimony and several others who submitted testimony today expressed clear concern that the CR SEC is intentionally seeking to dominate our nation's transit rail sector with the completion of several US public transit projects already CR RSC has fostered itself to be a dominant competitor in our transit and rail car manufacturing industry do you anticipate that CR rsync will make a gradual impact on our rail sector or can we expect a more dramatic and swifter impact mr. Johnson it'sit's an is a terrific question it's offer it's already altered the landscape there is no question about that and it's it's winning approximately three out of every four transit awards Atlanta is actually a an exception to that but they're but but they're making substantial progress again by offering prices that are essentially lost leading the the ultimate result of all of this is going to be reduced competition that is its competitors the incumbent firms like Hyundai Kawasaki Alstom the others will exit the market if they are not winning awards and so there's a combination of tools that are available I think to both make the experience better for local transit agencies and for taxpayers as well one of those is obviously to create a level playing field for the bidding the the incumbent companies are simply not competing against another company NCRC they're they're competing against a country that's the the that's the issue that the the tips would would alleviate the other issue where do you live all that playing field how do you level that playing field well yeah that would exclude state-owned enterprises from competing for the contracts and so CRC would need to divest itself of its interests in the Chinese government or find another buyer for for its assets the other issue and I think this is an important one is the size of the transit spend and that has been an impediment for many firms to stay engaged in the US market and so I'm hoping as part of this infrastructure conversation that the Congress is having with the White House that there will be a robust sustained commitment to building out transit and rail infrastructure in the United States that's going to send a signal to these firms that it can stay in these markets markets invest in these workers invest in capital and and I think that's the ultimate outcome that we'd like to see thank you mr. Sulu fo the integration of Chinese technology into our transit network is intertwined with national security with the implementation of GPS safety figures safety features Wi-Fi systems and numerous other nuanced technologies China gains considerable access to gather Intel it do you believe that this requires hyper vigilance from our intelligence community and I'd like for you to answer also general Adams Johnson without a doubt and the good news is if you look at the number of industrial and economic espionage cases and if you look at it the the cyber espionage cases in particular they're they're heavily focused on the People's Republic of China and their intentions because that's where a lot of the activity is they're by no means the only player we have to worry about but or actor we have to worry about but but but that the good news is is awareness is high the bad news is is awareness is high because there's a whole lot of activity going on animals yes sir we do need to be hyper vigilant and as I said before by the time we detect a threat from cyber security it's already too late the Chinese are not interested in telegraphing their intent good for us they actually have we know they want to conquer the global freight rail market and it's it's good to see this level of interest from Congress because it supports our intelligence community's hyper interest in this dynamic as well so thank you and thank you I want to thank all of the witnesses for their testimony and I also want to thank chairman DeFazio for holding this very important hearing today on how we can protect our nation's rail infrastructure with that I yield back I thank gentleman I represented Miller Thank You chairman DeFazio and ranking member graves and thank all of you all for being here today so loop up if you need to get a plane go we they don't hold planes from me talking all the time and be safe it is of the utmost importance that we continue to focus on stabilizing our domestic industries by preventing unfair business practices we know that anti-competitive business practices among the SOE s should damage private sector rail cars shirring could damage railcar manufacturing and create an imbalance leading to the loss of jobs in the united states the railcar manufacturing industry is one that we must protect mr. Galloway I enjoyed your quote on the internal structure of how a competitive market is supposed to work the advantage is given to state-owned enterprises threatened to undermine the benefits gained from fair competition in true private sector productions such as improving efficiency and technological advancement you state that the anti-competitive practices displace private sector competitors causing a domino effect throughout the United States supply chains and the business owners workers and families who rely on them what are some ways in which Congress can improve oversight to ensure that state-owned enterprises do not upset a rail economy I think from a policy perspective and an action perspective in ensuring that state-owned enterprises are behaving as good corporate citizens they're making the investments necessary in the u.s. to produce goods here in the US rather than offshoring their supply chains and in their goods production back to the Chinese economy or elsewhere is is critical to maintaining that level playing field unfortunately under the current structure of SOE that's very unlikely to occur and and not being a policy maker I'm uncertain and what the best path forward would be to ensure that if CRC is going to operate here in the US and is going to provide rail cars that they're doing it aboveboard and they're doing it as a good corporate citizen sort of preventing them from actually operating here in the US to begin with what is the future of the world market if this behavior continues well I think we're already seeing when the future of the world market which is heavy displacement of domestic rail car manufacturing in many different countries I cited earlier the Australian example where the railcar manufacturing sector has been completely decimated and in the last remaining producer move their operations to China in order to compete with Chinese firms with with CRC so in and you're seeing this type of cascading effect across a lot of other markets so both developed and developing where there were rail car sectors that existed that are no longer the case Thank You mr. Washington what are the top issues that you are dealing with as a transit agency with foreign companies that bid and operate here well I think one of the top issues is making sure that they invest in the local area which is why we included in the evaluation criteria local employment plans and local employment requirements I think the other big thing is suppliers as well having suppliers near or in close proximity in this case to final assembly plants is very very important as well I see those as some of the top challenges with the suppliers be locally owned as well or me with the suppliers be locally owned the suppliers can be locally owned yes we prefer that we definitely prefer that which is why I said in my statement the idea that we need to stand up our own passenger rail car manufacturing facility in this country slash an industrial yard with suppliers located there as well okay thank you I yield back my time thank gentlelady seeing no other members prepared to ask questions I would thank all the members of the panel for their interesting and instructive testimony and the amount of time you devoted to us today this is a critical issue and thank you for being here with that the committee stands adjourned you