Democrats and Republicans unite to target China

Senate Majority Leader Chuck Schumer, a Democrat from New York, speaks during a press conference after the Democratic Senate’s weekly policy luncheon on Capitol Hill in Washington, DC, Tuesday, April 27, 2021.

Al Drago | Bloomberg | fake images

These days, it can seem like there are very few issues that Democrats and Republicans agree on. That is, of course, unless someone proposes a bill intended to challenge Beijing’s growing global influence.

The United States Competition and Innovation Act of 2021, a wide-ranging piece of legislation expected to cost around $ 200 billion, seeks to do just that.

Assembled by Senate Majority Leader Chuck Schumer, DN.Y., the bill has united senators from both sides of the political aisle behind a set of provisions to boost US technology research and manufacturing considered Critical to US economic and national security interests.

The scope of the bill, the end result of input from at least six Senate committees, reflects the many fronts in the rivalry between the United States and China, as well as the urgency of a global semiconductor shortage that has hit manufacturers. of automobiles, electrical appliances and telephones. .

The proposal, subject to final changes:

  • Provide $ 52 billion to support domestic semiconductor manufacturing.
  • Authorize $ 81 billion for the National Science Foundation from Fiscal Year 2022 through Fiscal Year 2026
  • Authorize $ 16.9 billion for the Department of Energy during the same period for research and development and energy-related supply chains in key areas of technology.
  • Authorize $ 10 Billion for NASA’s Human Landing Systems Program

Most of the 1,400-page plan is a proposal formerly known as the “Law of Infinite Borders.”

Now an amendment, that provision by Schumer and Sen. Todd Young, Republican of Indiana, would breathe new life into the National Science Foundation, allocate $ 81 billion for the NSF between fiscal year 2022 and 2026, and establish a Directorate of Technology and Innovation.

Management would ensure that NSF funding is channeled to the development of critical technologies, including artificial intelligence, high-performance computing, robotics, and semiconductors.

“This legislation will put our country on the path to innovate, produce and compete with the world in the industries of the future,” Schumer said from the Senate on Monday.

“So far this bill has gone a bit under the radar. But it is an incredibly important piece of legislation, “he added. “At its core, the US Competition and Innovation Act seeks to maintain America’s role as the world’s economic leader. Few topics could be more important ”.

Some senators believe Schumer’s timeline is ambitious given a series of Republican requests for changes and haggling over some existing provisions, though the bill is expected to leave the chamber sometime in the next few weeks.

Sen. Rand Paul, R-Kentucky, for example, has voiced support for an amendment to ban US funds from going to research in China that increases the lethality of viruses, an implicit acknowledgment of theories that Covid- 19 escaped from a lab. in Wuhan province.

Meanwhile, Republican Sen. John Cornyn of Texas last week criticized an addition by Michigan Democrats Gary Peters and Debbie Stabenow that would require contractors on federal projects to pay so-called prevailing wages to their employees.

Despite last-minute complaints, Schumer remained optimistic as of Monday that the upper house will be able to pass the measure by the end of the week. The Senate is scheduled for a recess next week, so if they can’t finish by Friday, work on the legislation will stop until the week of June 7.

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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 embarked on a government-wide review of key supply chains, leading much of the executive branch to assess how dependent the United States is on a crucial group of Chinese exports.

Many technologies deemed critical to the future of American businesses – electric vehicles, smart cities, faster computers, and cutting-edge weaponry – are made possible in large part by shipments of rare earths mined in China.

Apple, for example, uses rare earths in its speakers and cameras and to vibrate its phones.

China supplied 80% of the rare earths imported by the United States between 2016 and 2019, according to the United States Geological Survey.

If economic competition accelerates or geopolitical tensions worsen 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 tried for years to assert its sovereignty over the South China Sea and the Paracel Islands, where Beijing has built missile bases, radar facilities and an airfield. The United States, seeking to defy the invasion of China, frequently sends Navy ships through the region to show its firepower.

While China does not have a technological advantage in semiconductor manufacturing, its geographic proximity to those that do is also a potential problem.

Foundries using the most advanced manufacturing processes, known as the 5-nanometer node, are operated exclusively by Samsung in South Korea and the Taiwan Semiconductor Manufacturing Company in Taiwan.

That’s probably one of the main reasons the Senate bill also includes $ 52 billion in incentives for semiconductor companies to build new factories in the US, a priority endorsed by Senators Mark Warner, Virginia Democrat and Cornyn.

The bill would fund a grant program administered by the Commerce Department that, to an unspecified degree, would match the financial incentives offered by state and local governments to chipmakers upgrading or building new factories.

“If a state provided some kind of benefit to a company to build a smelter there, the federal government would match it,” said Clete Willems, a partner at the Akin Gump law firm, whose clients include members of the chip industry.

Willems, a former trade official in the Trump and Obama administrations, said chipmaker Intel has extensive chip-making capabilities in the United States but tends to produce for its own established supply chains.

“We are very good at semiconductor design; we are very good at the intellectual property part. But we don’t really win that much here, ”he said. “We don’t have a lot of new foundries that you can call and order, and they can supply anyone.”

Modern chip factories can cost tens of billions of dollars to build and need to be equipped with machines capable of printing circuits only several atoms wide. Although the final amount the federal government will make available for such semiconductor grants is still being finalized, Willems said it could be around $ 10 billion.

While Schumer may have an easier job garnering support for the plan thanks to the inclusion of so many senators, the legislation could face a slightly tougher time in the House.

This is because while some sections do a better job of turning their dislike of the Chinese government into pro-American targets, other senators took a more aggressive tone.

The Strategic Competition Law, for example, authorizes $ 1.5 billion over five years for the “China Anti-Influence Fund to counter the evil influence of the Chinese Communist Party globally.”

The authors, Senators Robert Menendez, DN.J., and Jim Risch, R-Idaho, of the Foreign Relations committee have made it clear that they are targeting disinformation spread by the Chinese government and material efforts to undermine the United States and your allies.

But some progressive Democrats, like Rep. Ilhan Omar of Minnesota, might object to what they see as a growing trend among US lawmakers to blame China for the country’s ills.

Representative Ilhan Omar (D-MN) offers a press conference to discuss legislation creating “a federal grant program to help local governments invest in waste reduction initiatives,” at the United States Capitol at Washington, July 25, 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 internal troubles and demonizes Chinese-Americans,” Omar tweeted on Wednesday. “Racism has no place in political debates.”

Representatives for Menéndez and Risch did not respond to requests for comment from CNBC.

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 “continuing human rights abuses by the Chinese Communist Party, including the Uighur genocide.”

House Speaker Nancy Pelosi, D-California, voiced her support for a diplomatic boycott last week, saying “we cannot proceed as if there is nothing wrong with the Olympics going to China.”

Despite the potential for objections from a handful of House lawmakers, Willems said much of the Senate bill is expected to receive broad bipartisan support in both houses.

And that, in contrast to the heated and polarized discussions about infrastructure spending, could represent one of the last glimpses of 2021 of teamwork on Capitol Hill.

“I think you can still get a coalition for this because it plays with the majority of the members,” he said Monday morning. “It’s about boosting American competitiveness, vis-à-vis China, but also vis-à-vis the rest of the world.

“If contextualized properly, some of these articles will continue to be incredibly popular,” he added.

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