Testimony From Peter Harrell on Tools to Counter the CCP’s Industrial Policy and Supply Chain Threats
Peter Harrell’s testimony to the House Select Committee on China addresses why the United States should act before Chinese vehicles and robots become entrenched, how exporters evade restrictions, and what domestic investment must accompany import controls.
Committee
The Select Committee on China
Hearing Title
Import Controls: Tools to Counter the CCP’s Industrial Policy and Supply Chain Threats
Date
September 16, 2026
In his testimony to the House Select Committee on China, Peter Harrell argued that the United States should act before Chinese products establish themselves in the American market rather than after. He pointed to Chinese internet-connected vehicles in Europe and other unrestricted markets, where they climbed from low single digits to 20–25 percent of new sales in 18 to 24 months, and warned that US market share could follow the same path absent strong and durable action. He made a parallel case on humanoid robots: a decade ago, China built the entire industrial ecosystem for drones, which the United States is now recreating at great cost, and the same dynamic will play out in robotics unless the industrial base is established domestically now instead of relocated at a cost of tens of billions of dollars years from now. To get ahead of such problems systematically, he recommended that the federal government conduct a survey of US import vulnerabilities — identifying which products depend on imports and, among those, which depend specifically on China rather than on diversified or allied sources — modeled on an exercise Australia completed several years ago.
Harrell also addressed the ways restrictions get circumvented. He described two forms of Chinese evasion: the illegal practice of relabeling Chinese-made goods as products of third countries such as Vietnam, which is an enforcement problem requiring Customs and Border Protection and importers to focus more closely on trade data; and the legal practice of shipping components to a third country for final assembly, which typically confers that country’s origin under US law. For high-risk national security products, he suggested rules should account for where components originate, not only where final assembly occurs. On outbound flows, he noted that the outbound investment rule begun under the Biden administration and expanded by the COINS Act remains narrowly focused on high-technology sectors, and raised the question of whether restrictions should extend to industrial-base sectors as well. Absent clearer law and regulation, he said, companies will continue making the decisions they see as economically rational.
On existing dependencies, Harrell urged an aggressive but realistic transition. Citing China’s 2025 curtailment of rare earth exports, he noted that dependencies accumulated over 15 to 20 years cannot be severed overnight without shutting down US manufacturing, and that alternative supply must scale up in parallel. He cited Department of Defense grants, loans, equity investments, and offtake agreements in neodymium mining and processing as a model pairing supply-side and demand-side incentives, and stressed that critical minerals cannot be secured by the United States alone, requiring work with Canada, Brazil, and prospective sites in Africa. Domestically, he identified three necessary components: R&D that develops superior alternatives rather than replicating Chinese processing methods — such as rare-earth-free magnet technology developed at the University of Minnesota — incentives for small and large manufacturers to scale production, and sustained education and workforce training investment to staff the facilities being built.
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Facts Only
* Peter Harrell testified to the House Select Committee on China.
* Harrell argued the United States should act before Chinese products become entrenched in the American market.
* Chinese internet-connected vehicles in Europe and other markets increased from low single digits to 20–25 percent of new sales in 18 to 24 months without strong action.
* China built an industrial ecosystem for drones a decade ago, which the United States is now recreating at great cost in robotics.
* Harrell recommended a federal government survey of U.S. import vulnerabilities, identifying dependencies on China versus diversified sources.
* Harrell described two evasion methods: relabeling goods as from third countries (e.g., Vietnam) and shipping components to a third country for final assembly to secure origin.
* For high-risk national security products, rules should account for component origin, not only final assembly.
* The outbound investment rule under the Biden administration and the COINS Act focus narrowly on high-technology sectors.
* Dependencies accumulated over 15 to 20 years require parallel scaling of alternative supply.
* Harrell cited Department of Defense grants, loans, equity investments, and offtake agreements in neodymium mining/processing as a model for incentives.
* Domestic components needed include R&D for superior alternatives (e.g., rare-earth-free magnets), production scale incentives, and workforce training.
Executive Summary
Peter Harrell testified before the House Select Committee on China regarding U.S. strategy concerning Chinese industrial policy and supply chain threats. He argued that the United States must act proactively to prevent Chinese vehicles and robots from becoming entrenched in the American market, citing examples where restrictions were not applied early enough, leading to significant market share gains over time. Harrell proposed a methodology for action, suggesting the federal government survey U.S. import vulnerabilities to identify dependencies on China versus diversified sources, modeled after an Australian exercise.
He addressed methods of evasion, noting two forms: relabeling goods as originating from third countries like Vietnam and shipping components to a third country for final assembly which confers that country’s origin under U.S. law. For high-risk products, he suggested rules should focus on component origin, not just final assembly location. Regarding existing dependencies, Harrell advocated for an aggressive transition supported by parallel supply scaling and domestic investment in research, manufacturing incentives, and workforce training. He used the curtailment of rare earth exports as an example of how multi-year dependencies require sustained effort.
The testimony further discussed export controls, noting that current outbound investment rules are narrowly focused on high-technology sectors and questioned whether they should extend to industrial-base sectors. Harrell emphasized that without clear regulations, companies will default to economically rational decisions regarding trade.
Full Take
The testimony constructs a framework for managing technological competition by emphasizing systemic foresight over reactive regulation. Harrell pivots the discussion from immediate trade disputes to long-term industrial capacity building, framing import controls as necessary components of a broader domestic investment strategy. The pattern observed is a recognition that external economic dynamics—whether in automotive technology or robotics—are contingent upon the domestic ability to establish an underlying industrial base. The argument suggests that control over supply chains is less about tariffs and more about controlling the foundational capacity for innovation and production.
The discussion on evasion mechanisms highlights a tension between legal formalism (where origin is determined by assembly location) and practical reality (where components matter). This forces a necessary re-evaluation of where regulatory focus should lie—on material sourcing rather than just transactional points. The call for parallel domestic investment in R&D, scaling, and workforce training reflects a pattern of leveraging public incentives to shift deeply embedded economic structures toward alternative realities.
The underlying implication is that sovereignty in the modern economy resides not only in border control but in controlling the inputs necessary for future technological dominance. The structure echoes historical struggles over resource control; here, critical minerals and manufacturing know-how serve as the modern equivalent of strategic choke points. The absence of clear, comprehensive regulation remains a persistent challenge, relying on private actors' perceived rationality rather than mandated geopolitical goals.
Bridge Questions: If regulatory focus shifts to component origin for security reasons, how can domestic incentives effectively balance proprietary industrial secrecy against public interest demands? What mechanisms exist to ensure that promised R&D alternatives are deployed rapidly enough to counter fast-moving external industrial shifts? What institutional structures are needed to bridge the gap between high-level strategic goals and granular enforcement across complex supply chains?
Sentinel — Human
The text exhibits the structure and density of expert testimony, strongly suggesting human authorship rooted in policy analysis rather than synthetic generation.