There's concern China is building significant overcapacity in the auto sector: CFR’s Michael Froman

and new this morning the Commerce department will be investigating National Security risk from connected Autos that have parts from China and other countries of concern the department now worried about the personal data risk if your phone connects to your car as well as the risk that the vehicle could be remotely disabled by Bad actors department wants to take the action now before Chinese manufactured Vehicles become widespread in the US joining us right now to talk about this and so much more

former US trade representative Michael Fran he's now Council on Foreign Relations president it's great to have him at the table it's be you know I take my phone and I plug it into the car and now by the way you don't even need to plug it into the car half time but if you want the if you want the power which my battery is always low I need to by the way you do this all the time in so many places how worried are do you by the way that's actually maybe the better way to start do you plug in your ph

one do the same I I do the same look I what it underscores is just how one connected we are and how vulnerable we are to potential cyber attacks from China or from from elsewhere from just Bad actors anywhere um in our daily life but do you think we're particularly vulnerable to China I mean I think that actually is the fundamental question with all every day we have a different headline about China security risk China security risk China you know or it's Tik Tock or it's this or it's that are t

he risks coming from China severely more dangerous than anywhere else you know I think this week we've seen a couple things one is a new executive order regulating the sale of data by data Brokers including to China and five other countries and then we've seen movement on the hill with a bill to put 100% tariffs on imports from Imports of cars from China so I think there's a particular focus on China I'm not sure the cyber security risk is specifically focused on China or should be specifically

focused on China there are plenty of Bad actors out there engaging in cyber security intrusions uh but there is concern that China is building up significant overcapacity in the auto sector particularly the electric field sector and unlike steel and aluminum and solar panels there's an effort to get ahead of it this time and try and figure out what do we do to make sure they're not dumping those cars on our markets security concern and how much of this is an economic concern well right now we ha

ve very little very little imports from China of of Autos about $2 billion doar a year and mostly by the way from GM and Ford from us automakers who produce in China it's not the the big Chinese we just heard from Phil our last report was about how they are building they're going to be building in Mexico if you've got NAFTA and stuff comes across the border huge capacity and and I think that's what people are focused on they're again trying to get ahead of it this time and say this is a key sect

or for our economy we don't want to find ourselves in the same situation we were in other sectors where we saw the over capacity being built the Chinese have to do something with all that over capacity here's the other conundrum I don't know if if you've seen some of the comments that Elon Musk has made over the past couple weeks he would tell you that the byd vehicles are better than the vehicles that are being manufactured by just about every other us every other every us manufacturer except i

n his mind Tesla now you could say that that is a you you may think he has motivations to say that for different reasons but for what I I I don't disbelieve him and there are a lot of people who've driven in the latest byd Vehicles who say this is pretty amazing there are several Chinese EV companies producing several kinds of of electric vehicles that are very good and so I think it's it's putting a challenge on our industry to continue to innovate and continue to uh try and come up with new mo

dels that people want and this these sorts of actions are about giving them the space to do that now we could say is that the best thing for consumers but here again I think the the Paradigm has shifted where it's not all about consumers anymore it's not all about efficiency getting the cheapest product to consumers or the cheapest best product into the hands of consumers there's an effort to say well we want redundancy we want resilience we want security we want to have our own industry in key

sectors even if it means imposing a cost on consumers a really bad scenario for me it so not only do the big three got to compete against Tesla's EVS now even China has great EVS y we just signed these labor agreements that make it very difficult to foresee how the big three can be competitive already with Tesla non-union looks to me like the only way it's going to happen is is the government's going to have to support the big three somehow again I I I would underestimate the capacity of the big

three to continue to innovate I think GM and others have have been what evidence where have we seen them innovate in the last 10 years I think I think a number of them the B you can't park near your the front of your was it the Vault or the bolt that that you can't park near your house do you have a wooden house you can't park it near there because your house is going to go up yeah look this is a new sector there's going to be a lot of change a lot of new infrastructure being built and I think

the big three are trying very hard to play who wants a big three EV no they haven't found a person yet well that's I don't think that's true Joe but I think uh I think what they're what they're trying to do is create the space for it now I think it comes at a cost and I think politicians need to say all right there's a trade-off here do we want a US EV industry and what cost are we willing to pay for that we have one it's called Tesla that's that's do we want more than that and do we want a comp

etitive industry if you build it they will come that they haven't built it yet well but the question is if we let these cars in maybe they would and that's the flip side you think the competion make better you mean I could argue to you that one of the reason the AV takeup has not been as high is because the actual cars themselves are not good enough all right I agree produ problem but you've already got Tesla as a as a model of what you'd like to be and they're nowhere near that and happy to hav

e a monopoly huh you're happy to have a monopoly I'm not saying I'm happy but if you know if it's a monopoly based on how good your product is I mean we've seen that in big Tech too do you close down a big tech company just cuz they're so good at what they do that's Peter Teal's got a book out called that real huh Winner Takes all no I forget what it's called but that's the theory but it's about that is the if you're really that good you you have a natural monopoly but it's not illegal but it al

so seina KH will call it the fact that all of these things all of this industry is put subsidized by yeah at least people come after my neighborhood every car is a Tesla everyone Michael Froman thank you by the way the Peter teal book uh 0 to1 01 name of the book coming up W Wendy never we weren't going to do this anyway facing backlash for its new pricing plan now clarifying that it no it never really