June 4, 2023

Employees are working on the silicon wafer production line in a GalaxyCore Inc. factory in Jiashan County, Jiaxing City, Zhejiang Province, China on May 25, 2021.

Guo Junfeng | Visual China Group | Getty Images

The Senate is due to pass one of the largest industrial laws in US history this week to bolster the country’s technology production to keep up with competition from China.

The bill, which is expected to easily evacuate the Upper Chamber with support from Republicans and Democrats, includes tens of billions of dollars in scientific research, subsidies for chip and robotics manufacturers, and a National Science Foundation overhaul.

The scope of the bill, the end product of at least six Senate committees and weeks of debate, reflects the many fronts in the rivalry between the US and China and offers a rare glimpse into bipartisan legislation to combat Beijing’s economic and military expansion.

The proposal, subject to definitive changes, would:

  • Dedicated $ 52 billion to support domestic semiconductor manufacturing
  • Authorized $ 81 billion for the National Science Foundation from Fiscal Year 2022 through Fiscal Year 2026
  • Approval of US $ 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.
  • U.S. diplomats are banned from participating in the Beijing 2022 Winter Olympics bar

Some commentators see a modern parallel to the Cold War between the US and the Soviet Union in the Innovation and Competition Act of 2021. 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.

The final bill is expected to cost about $ 200 billion.

Non-partisan Blitz

Senate Majority Leader Chuck Schumer, Democrat of New York and one of the bill’s top cheerleaders, spent weeks putting together the many pieces of the bill. The final invoice should contain well over 1,400 pages of text.

“The bipartisan legislation will be the largest investment in scientific research and technological innovation in generations and will set the United States on the path to lead the world in the industries of the future,” Schumer said Monday from the Senate session.

The bill is a product of six committees and contains dozens of Republican amendments, he said, adding that the house would consider some final changes on Tuesday before passing the bill.

“It will be one of the most important things we’ve done in a very long time, the largest investment in scientific research and technological innovation in generations, decades,” said Schumer.

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For their part, Senate Republicans have largely stuck to the tough Trump-era China approach, even if that means a higher price tag or a more involved federal government.

Most of the mammoth piece of legislation is what was previously known as the Endless Frontier Act.

Now a change, that provision by 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 a directorate for technology and innovation set up.

“Today our leadership is challenged by a state capitalist regime in Beijing that threatens to win the next century by dominating the critical technologies that will shape it,” Young wrote in a May post on the Ripon Forum, a Republican opinion journal.

“It is time the United States went on the offensive by passing the bipartisan Endless Frontier Act, which would cement US leadership in scientific and technological innovation through increased investment in the discovery, development and manufacture of technologies, which are vital to national security and economic competitiveness, “he added.

Even Conservative Senator John Cornyn, R-Texas, has spoken out in favor of the law. Its bipartisan CHIPS for America Act has since been incorporated into the broader bill and would allocate approximately $ 50 billion to boost U.S. semiconductor manufacturing.

“The reality is that despite the back and forth in the process and some political snippets, the Senate has come up with a very comprehensive bill,” Dewardric McNeal, who was a political analyst at the Pentagon during the Obama era, told CNBC.

“One of the biggest questions many China experts had about this legislation was whether it would focus on ‘running faster than China’ by investing more in ways to stay ahead and beat China technologically, or whether they would focus more on blocking China’s progress and fighting China if it got too far on legal and regulatory measures, “he added.” It looks like the Senate has tried a bit of to do both. “

The bill would fund a Department of Commerce-administered grant program that, to an unspecified extent, offsets financial incentives from states and local governments to chipmakers who upgrade or build factories.

Schumer and others hope that such programs will entice domestic and foreign chipmakers to open new, state-of-the-art foundries in the United States. The world’s most advanced foundries are operated solely by Samsung in South Korea and Taiwan Semiconductor Manufacturing Co.any in Taiwan.

The rare display of bipartisanism is even more impressive when you consider that even with majorities in both chambers, Congress Democrats were unable to move forward.

With Sens. Joe Manchin, DW.Va., and Kyrsten Sinema, D-Ariz., Who are against the abolition of filibusters, progressive political elements from immigration reform to gun control have stalled.

Infrastructure has barely improved: hundreds of billions of dollars still divide Republicans and Democrats, many of whom campaigned for the promise to pass a bill to repair the country’s roads, bridges, and waterways.

Another cold war?

It is clear to all of the major parties involved – Democrats, Republicans and Chinese officials – that the bill and its broad support provide the clearest evidence yet that Washington’s deep skepticism about Beijing was not reserved for the Trump administration alone.

Last week, too, President Joe Biden underscored his government’s deep distrust of the Chinese government.

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.

On August 2, Americans will be banned from investing in 59 Chinese companies, including Aero Engine Corp. of China, Aerosun Corp. and Huawei Technologies.

The government announced Tuesday, hours before the Senate was due to vote on the technology bill, that it would consider dramatically expanding US production of lithium batteries, rare earth minerals and semiconductors.

Earlier this year, the White House announced it would conduct a 100-day review of domestic supply chains for critical materials and technologies. Officials have been careful not to name a single country, but commentators say the review and resulting recommendations are seen as an attempt to reduce US reliance on Chinese exports.

Many US technologies that are believed to be critical to future economic and military superiority – electric vehicles, smart cities, faster computers, and cutting edge weapons – are currently being made with supplies of rare earths from China.

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

A more open shot at Beijing comes from part of the bill known as the Strategic Competition Act, which is a product of the Senate Foreign Affairs Committee.

Sens. Robert Menendez, DN.J., and Jim Risch, R-Idaho, want $ 1.5 billion over five years to support the “Fund to Combat Chinese Influence to End the Malicious Influence of the Chinese Communist Party to counteract this worldwide ”.

The Strategic Competition Act would also ban US officials from the 2022 Winter Olympics in Beijing and call for an end to “ongoing human rights violations by the Chinese Communist Party, including the Uyghur genocide.” The provision would not exclude US athletes from participating in the Games.

U.S. House of Representatives Speaker Nancy Pelosi (D-CA) holds her weekly press conference with reporters from Capitol Hill in Washington, DC on May 20, 2021.

Ken Cedeno | Reuters

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 persist in the House of Representatives, where the bill is expected to survive another round of discussion before he got to Biden’s desk.

Biden, who on Tuesday called for $ 50 billion to boost semiconductor manufacturing and research, is widely expected to sign the bill and has spoken out broadly in favor of strengthening U.S. chip manufacturing.

House spokeswoman Nancy Pelosi, D-California, on Thursday reiterated her support for a diplomatic boycott of the 2022 Olympics.

“Although China has changed in the last generation, its administration’s appalling human rights record has not changed,” she said in a press release from the 3rd Tiananmen Democracy Demonstrator. “The US Congress has and will continue our decades of bipartisan commitment to hold the Chinese government accountable.”

Despite the pointed formulation of the bill, McNeal said comparisons to the Cold War between the US and the Soviet Union were unwise and misleading.

“It’s not a Cold War at all. But given the high level of economic integration and dependency between the US and China, it’s a little more complex and complicated than that,” he wrote. “Unlike the Soviet Union, China has no real diplomatic allies (regardless of North Korea and Pakistan), no military alliances and no ideological bloc to strengthen its diplomacy and security policy. All things that the Soviet Union could boast of.”

“It still has to go to the House of Representatives and there’s no real way of knowing how the process will be (always messy) over there, nor what the end result will be,” he added, “but the Senate has something big and done great things. “