February 25, 2024

The Senate on Tuesday passed one of the largest industrial laws in US history to ensure the US remains competitive with China as one of the world’s technological powerhouses.

The bill, which Chamber 68-32 passed, provides around $ 250 billion in funding for scientific research, subsidies for chip and robot manufacturers, and a revision of the National Science Foundation.

The scope of the bill, the end product of at least six Senate committees and nearly all members of the Chamber, reflects the many fronts of rivalry between the US and China.

It also likely marks one of the last major bipartisan initiatives of 2021, evidence that U.S. lawmakers generally endorse legislation that counteracts Beijing’s economic and military expansion.

A worker in the photolithography department of a Mikron Group’s semiconductor factory in Zelenograd, Moscow.

Anton Novodereschkin | TASS | Getty Images

If the country fails to expand semiconductor production or redirect rare earth supply chains, proponents say, the US could be at a strategic disadvantage in the years to come.

Most of the US Innovation and Competition Act is a proposal previously known as the “Endless Frontier” and approved by Senate Majority Leader Chuck Schumer, DN.Y., and Senator Todd Young, R-Ind.

CNBC policy

Read more about CNBC’s political coverage:

Endless Frontier overtakes the National Science Foundation, allocates tens of billions to NSF between fiscal years 2022 and 2026, and establishes a directorate for technology and innovation.

“The passage of this bill – now known as the US Innovation and Competition Act – is the moment when the Senate lays the foundation for another century of American leadership,” said Schumer in the Senate on Tuesday evening.

“Authoritarian governments around the world believe that warring democracies like ours cannot unite around national priorities,” he added. “Well, let me tell you something: I believe you are wrong. I believe that this legislation will enable the United States to innovate, manufacture, and outperform the world in the industries of the future.”

The bill would also fund a grant program administered by the Department of Commerce that provides financial incentives offered by states and local governments to chipmakers who upgrade factories or build new ones.

Specifically, the bill provides $ 52 billion to fund semiconductor research, design, and manufacturing initiatives. The Semiconductor Industry Association, a trade group representing some of the country’s chipmakers, was quick to welcome the Senate’s efforts.

“The USICA’s passage by the Senate is a critical step in strengthening US semiconductor manufacturing and innovation and an indication of the strong, bipartisan support in Washington to ensure sustained American leadership in science and technology,” said John Neuffer. CEO of the SIA. “Implementing these investments would help strengthen the American economy, national security, technology leadership, and global competitiveness for years to come.”

According to the vote count, praise came from both sides of the political corridor after the Senate passed the bill. Senator Ben Sasse, R-Neb., Explicitly welcomed the clear goals of the legislation, adding that he would have preferred an even stricter bill.

“As a China hawk and fiscal hawk, I would have liked this bill to take a more focused and aggressive approach to the China threat – but this is a strong start,” he said in a press release. “The Chinese Communist Party is working overtime on cyber, AI and machine learning so that it can become the world’s pre-eminent superpower. We mustn’t let our feet off the gas. ”

Read more about China from CNBC Pro

The success of the Senate bill also comes from the fact that the White House is reinforcing its own recommendations on securing America’s supply chains that run through China and counteracting Beijing’s geopolitical ambitions.

President Joe Biden welcomed the passage of the bill Tuesday night and said he was encouraged by the bipartisan effort.

“It is long time we invested in American workers and American innovation,” Biden said in a statement. “We are competing for victory in the 21st century and the starting shot has been fired. As other countries continue to invest in their own research and development, we cannot risk falling behind.”

The White House announced on Friday that it would expand restrictions on American investments in certain Chinese companies with alleged links to the country’s military and surveillance efforts, adding more companies to the growing US blacklist.

Then, on Tuesday, the White House said it would examine a dramatic expansion in US production of lithium batteries, rare earth minerals and semiconductors.

“USICA reaffirms its readiness to keep a sustained focus on strategic competition between the US and China through a bipartisan and state-wide approach, leading to the upcoming G7 and NATO summits, at which the US will likely attempt to work with allies present a united front towards China, “wrote Mario Mancuso, director of international trade and national security at the Kirkland & Ellis law firm.

While the debate on multiple amendments prevented the Senate from passing the bill before the Memorial Day recess, the bipartisan passion for keeping the US competitive is expected to back its case in the House of Representatives.

The Chamber is expected to review the legislation in the coming weeks, albeit possibly at a slower pace as representatives draw up different sections.