Democrats and GOP team up to target China
Senate Majority Leader Chuck Schumer, a Democrat from New York, speaks during a press conference following the Democratic Senate’s weekly political lunch at the Capitol in Washington, DC on Tuesday, April 27, 2021.
Al Drago | Bloomberg | Getty Images
These days, it may seem like there are very few issues that Democrats and Republicans agree on. That is, of course, unless someone comes up with a bill to challenge Beijing’s growing global influence.
This is exactly what the U.S. Innovation and Competition Act of 2021 is aiming for, a sweeping piece of legislation that is expected to cost around $ 200 billion.
Assembled by Senate Majority Leader Chuck Schumer, DN.Y., the bill united senators on both sides of the political aisle behind a package of provisions to boost research and manufacture of U.S. technology deemed essential to the economic and national security interests of the United States.
The scope of the bill, the end result of input from at least six Senate committees, reflects the many fronts of the U.S.-China rivalry, as well as the urgency of a global semiconductor shortage that has hit manufacturers. automobiles, home appliance manufacturers and telephone manufacturers. .
The proposal, subject to final modifications, would be:
- Providing $ 52 billion to support domestic semiconductor manufacturing
- Authorize $ 81 billion for the National Science Foundation from fiscal year 2022 to fiscal year 2026
- Authorize $ 16.9 billion for the Department of Energy over the same period for research and development and energy-related supply chains in key technology areas.
- Authorize $ 10 billion for NASA’s Human Landing Systems program
Most of the 1,400-page plan is a proposal previously known as the “Endless Frontier Act”.
Now, an amendment, this provision of Schumer and Sen. Todd Young, R-Ind., Would breathe new life into the National Science Foundation, allocate $ 81 billion to the NSF between fiscal years 2022 and 2026, and create a leadership of technology and innovation.
Management would ensure that NSF funding is funneled into the development of critical technologies, including artificial intelligence, high performance computing, robotics and semiconductors.
“This legislation will put our country on the path of over-innovation, over-production and global competition in industries of the future,” Schumer said from the Senate floor on Monday.
“So far this bill has flown a little under the radar. But it is an incredibly important law,” he added. “Fundamentally, US innovation and competition law is about upholding America’s role as a world economic leader. Few questions could be more important.
Some senators believe Schumer’s timetable is ambitious given a series of Republican demands for changes and haggling over some existing provisions, though the bill is expected to largely clear the chamber at some point in the coming weeks.
Senator Rand Paul, R-Ky., For example, has expressed support for an amendment to ban all US funding going to research in China that involves increased virus mortality, an implicit recognition of theories that Covid-19 escaped from a lab. in Wuhan province.
Meanwhile, Republican Senator John Cornyn of Texas last week blasted an addition by Michigan Democrats Gary Peters and Debbie Stabenow that would require contractors on federal projects to pay prevailing wages to their employees.
Despite last-minute criticisms, Schumer remained optimistic as early as Monday that the upper chamber will be able to pass the measure by the end of the week. The Senate is due to take a recess next week, so if it cannot finish Friday, work on the bill will be suspended until the week of June 7.
His seemingly inevitable trip to the House is another reminder of the near-universal goal between the Biden administration and lawmakers to keep the United States competitive in its economic and geopolitical feud with China.
Earlier this year, the White House undertook a government-wide review of key supply chains, asking much of the executive branch to assess how much the United States depends on a crucial group. Chinese exports.
Many of the technologies deemed critical to the future of American businesses – electric vehicles, smart cities, faster computers, and advanced weaponry – are made possible in large part by shipments of mined rare earths in China.
Apple, for example, uses rare earths in its speakers and cameras and to vibrate its phones.
China provided 80% of rare earths imported by the United States between 2016 and 2019, according to the US Geological Survey.
If economic competition accelerates or geopolitical tensions escalate in the South China Sea, national security advisers say it is essential that the United States can continue to produce these technologies without trade with China. .
China has been trying for years to assert sovereignty over the South China Sea and the Paracel Islands, where Beijing has built missile bases, radar installations and an airfield. The United States, seeking to challenge the encroachment of China, frequently sends Navy ships across the region to show off its firepower.
While China does not have a technological advantage in semiconductor manufacturing, its geographic proximity to those who do is also a potential problem.
Foundries that use the most advanced manufacturing processes, known as the 5 nanometer node, are operated exclusively by Samsung in South Korea and Taiwan Semiconductor Manufacturing Company in Taiwan.
This is probably one of the main reasons why the Senate bill also includes $ 52 billion in incentives for semiconductor companies to build new factories in the United States, a priority backed by the senses. . Mark Warner, D-Va., And Cornyn.
The bill would fund a subsidy program run by the Department of Commerce that, to an undetermined extent, would match financial incentives offered by states and local governments to chipmakers who upgrade or build new factories.
“If a state were to provide some kind of benefit to a company to build a foundry there, then the federal government would do it,” said Clete Willems, a partner at the Akin Gump law firm, whose clients include members of the chip industry.
Willems, a former trade manager for the Trump and Obama administrations, said chipmaker Intel has extensive chip manufacturing capabilities in the United States, but tends to produce for its own established supply chains.
“We’re really good at semiconductor design; we’re really good at intellectual property. But we don’t do much here, ”he said. “We don’t have a lot of new foundries you can call and order, and they can supply anyone.”
Modern chip factories can cost tens of billions of dollars to build and must be equipped with machines capable of printing circuits only several atoms wide. While the final amount the federal government will make available for such semiconductor subsidies is still being finalized, Willems said it could be around $ 10 billion.
While Schumer may have an easier job of gaining support for the plan thanks to the inclusion of so many senators, the bill could face a slightly tougher time in the House.
That’s because, while some sections do a better job of pivoting their distaste for the Chinese government towards pro-American goals, other senators have taken a more aggressive tone.
The Strategic Competition Law, for example, authorizes $ 1.5 billion over five years for the “Anti-Chinese Influence Fund to Counter the Malignant Influence of the Chinese Communist Party in the World.”
The authors Sens. Robert Menendez, DN.J., and Jim Risch, R-Idaho, of the Foreign Relations Committee have made it clear that their target is disinformation disseminated by the Chinese government and material efforts to undermine the United States and its allies.
But some progressive Democrats, like Representative Ilhan Omar of Minnesota, might oppose what they see as a growing trend among U.S. lawmakers to blame China for the country’s ills.
Representative Ilhan Omar (D-MN) holds a press conference to discuss legislation creating “a federal grant program to help local governments invest in waste reduction initiatives,” at the U.S. Capitol in Washington on 25 July 2019.
Mary F. Calvert | Reuters
“We need to distinguish between justified criticism of the Chinese government’s human rights record and a Cold War mentality that uses China as a scapegoat for our own domestic issues and demonizes Chinese Americans,” tweeted Omar Wednesday. “Racism has no place in political debates.”
Representatives for Menendez and Risch did not respond to CNBC’s requests for comment.
The Strategic Competition section also calls for a boycott of the 2022 Beijing Olympics by US officials, not athletes, and demands an end to the “ongoing human rights violations of the Chinese Communist Party, including genocide. Uyghur ”.
House of Commons Speaker Nancy Pelosi, D-Calif., Expressed support for a diplomatic boycott last week, saying “we cannot go on as if all is well about the Olympics going to China” .
Notwithstanding the possibility of objections from a handful of House lawmakers, Willems said large parts of the Senate bill should receive broad bipartisan support in both chambers.
And that, unlike the heated and polarizing discussions about infrastructure spending, could represent one of the last 2021 glimpses of teamwork on Capitol Hill.
“I think you can still get a coalition for that because it plays with most of the members,” he said Monday morning. “It is about boosting American competitiveness, vis-à-vis China, but also vis-à-vis the rest of the world.”
“Appropriately contextualized, some of these articles will always be incredibly popular,” he added.