'They Were Playing Us For Uncle Sucker': Ed Markey Slams China Restrictions On EV Battery Production

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During a Senate Small Business Committee hearing last week, Sen. Ed Markey (D-MA) asked Center for Strategic and International Studies Senior Fellow Dr. Sujai Shivakumar about small business innovation.

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00:00We will go next to a ranking member Markey for his questions. Thank you, Madam Chair.

00:05Dr. Shiva Kumar, as you know, the small business innovation research and the small business

00:12technology transfer programs will expire in just over two months. And these programs have played

00:19an essential role in driving our country's innovation, resulting in at least 70,000

00:26patents and 700 public companies. Since its inception in 1982, the program has resulted in

00:33more than 207,000 awards, totaling more than 72 billion dollars. And you are one of the few

00:40researchers who has done extensive analysis of these programs. So could you speak, Doctor,

00:47to how multiple award winners are important to the growth of certain industries? And could you

00:52provide an example of a technology that would not exist without multiple award winners?

01:00Certainly. Well, I was just last month in Colorado looking at the emergence of a quantum

01:07innovation cluster in the Mountain West region. There are a number of SPIR companies among

01:15among those, and there are a limited number. So if you think about, you know, the need to actually grow

01:22our quantum industry, they are, and if you think of the particular solicitations, there are only going

01:29to be a limited number of these companies that can respond to any particular solicitation. So the idea of

01:38those companies will build by nature, need to garner multiple awards in order to build scale,

01:46and to grow the, grow the industry in that region. So it's not just, you know, the,

01:53there are concerns about whether there are, is there's a problem with multiple award winners,

01:59people coming, you know, gaming the system. There are cases to be made where multiple award winners are

02:08actually important to our national security. If we need to build up our quantum industry, for example.

02:14On the other hand, the, we have program managers at the various agencies who are best positioned to

02:21actually monitor any abuse of the program by, you know, gaming the system to get multiple awards.

02:27My recommendation is not for, you know, this, for the Senate or the Congress to sort of manage the

02:34program from here, but provide the, the, the, the program managers the resources and the, and the

02:40confidence to actually manage their programs. If there are problems, let them document the award,

02:46if they are going to give the award. Could you speak to the impact of the, of the 2022

02:52due diligence program in protecting our SBIR and STTR programs? So, uh, I, I think there is an,

02:59obviously an important, uh, aspect in protecting our IP, but there is also the consideration that,

03:05you know, it's a global race now for, uh, in terms of innovation. There are multiple countries in the

03:11world, including China, that have strong innovation systems. And as, uh, you know, the, the old, uh,

03:16federal football saying, you can't win purely on defense. You need a very strong offense, which is,

03:22which means that we need to supercharge our innovation system, you know, by making sure that

03:27our universities churn out, our, our research institutions churn out new ideas, by making

03:32sure that programs like SBIR take those ideas and bring them into businesses, uh, you know, build

03:38prototypes, get them ready for the market. And then to scale that, scale those technologies for,

03:44further up so that we can be competitive internationally, uh, uh, while also, uh, you

03:49know, creating new opportunities for Americans. So there is, it's, it's, yes, we need to defend,

03:55but I think the, we need to look at both sides of that equation as well. We need to have a strong

04:00offense in terms of a, a very vibrant innovation system. Yeah. And that strong offense would be

04:06not cutting the National Institutes of Health, not cutting investment in batteries and solar and wind,

04:11not cutting investment in the National Science Foundation, investing in our young people

04:16to compete. Here's a headline from just, uh, last week, China puts new restrictions on EV,

04:22battery manufacturing technology. Okay. Now that they have made the breakthrough,

04:27now that there are companies like BYD, Build Your Dreams, are way ahead of Ford and General Motors,

04:33and way ahead of Tesla, they're not going to put restrictions on the transfer of any of their

04:38battery technology around the world. Then those, they invited us in, you know, and, but their,

04:44their condition was, we have to share our technology with them. Now that they're sprinting ahead,

04:48they're going to put restrictions on. So it looks like they were playing us for uncle soccer

04:54the whole way, and we just have to be realistic about it. But the way to respond is not to cut our

04:59research in these critical areas. There's going to be 20 million all-electric vehicles sold around the

05:05world this year. We only sell 17 million total vehicles in the United States each year. And so

05:11we're seeding the future. And basically what China is doing is putting up the walls, uh, to protect,

05:18not just against us, but anyone else. Now, uh, being able to compete effectively with them on the

05:23marketplace. And we just have to be ruthlessly realistic about that reality. Thank you, Madam.

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