With both Republicans and Democrats increasingly worried about competition from Asia’s largest power, the US Senate on Wednesday cleared the bill with a 68-32 vote, one of the most significant bipartisan achievements in Congress since Joe Biden‘s presidency began in January.
“We are in a competition to win the 21st century, and the starting gun has gone off,” Biden said.
“As other countries continue to invest in their own research and development, we cannot risk falling behind. America must maintain its position as the most innovative and productive nation on Earth,” said Biden.
Senate Majority Leader Chuck Schumer said, “Whichever countries best harness technologies like AI, robotics and quantum computing will be able to shape innovation to its image.”
What is Innovation and Competition Act?
It is an industrial policy bill aimed at countering the surging economic threat from rival China.
It also represents the largest investment in scientific research and technological innovation “in generations,” according to Senate Majority Leader Chuck Schumer.
The bill is seen as crucial for US efforts to avoid being out-manoeuvred by Beijing as the adversaries compete in the race to technological innovation.
While the Senate’s top Republican Mitch McConnell stressed that the measure remained “incomplete,” it nevertheless passed by a healthy margin, highlighting how the nation’s competition with China is one of the few issues that can bring feuding Republicans and Democrats together.
What does the bill propose?
- The proposal aims to address a number of technological areas in which the United States has fallen behind its Chinese competitors.
- The bill allocates $52 billion in funding for a previously approved plan to increase domestic manufacturing of semiconductors. A summary of the Senate legislation notes how China is “aggressively investing over $150 billion” in semiconductor manufacturing in order to control the advanced technology.
- It also authorizes $120 billion over five years for activities at the National Science Foundation to advance priorities including research and development in key areas like artificial intelligence (AI) and quantum science.
- It facilitates tie-ups between private firms and research universities.
- The bill also seeks to counter Beijing’s growing global influence through diplomacy, by working with allies and increasing US involvement in international organizations after Republican former President
Donald Trump‘s “America First” agenda.
- It would also allow diplomats and the Taiwanese military to display their flag and wear their uniforms while in the United States on official businesses.
- The bill would authorize
NASAspending and its Artemis mission to the Moon. “As China has made it clear, they’re going to Mars, we are going back to the Moon to ready ourselves to go to Mars,” Senator Maria Cantwell noted.
- It proposes to block the purchase of drones manufactured and sold by companies backed by the Chinese government.
- It would also create broad new mandatory sanctions on Chinese entities engaged in US cyberattacks or theft of US intellectual property from US firms, and provides for a review of export controls on items that could be used to support human rights abuses.
- The bill has provisions to prohibit the social media app TikTok from being downloaded on government devices.
When will the bill come into effect?
The bill now heads to the House of Representatives, which earlier passed a different version. The two will have to be reconciled into a single bill before it is sent to the White House for the president’s signature.
What does China say?
Beijing on Wednesday accused Washington of “paranoid delusion” after the US Senate passed a sweeping industrial policy bill aimed at countering the surging economic threat from China.
The foreign affairs committee of China’s top legislature called the bill an attempt to interfere in the country’s internal affairs and deprive it of its “legitimate right to development through technology and economic decoupling”, state media reported.
“The bill shows that the paranoid delusion of egoism has distorted the original intention of innovation and competition,” said the National People’s Congress foreign affairs committee, according to a report by the official Xinhua news agency.
It said the bill was “full of Cold War mentality and ideological prejudice”.
Biden’s trade ‘strike force’
President Joe Biden ordered the review of critical supply chains in February, worried that the United States was falling behind after it struggled to gain access to critical goods during the Covid-19 pandemic.
The United States will target China with a new ‘strike force’ to combat unfair trade practices that the administration says are damaging US supply chains. The group will be led by the US trade representative, which has the power to enforce tariffs against China and other countries.
Here are some of the major recommendations and initiatives developed by US executive agencies:
- National security tariffs
The Department of Commerce is considering initiating a Section 232 investigation into the national security impact of neodymium magnet imports used in motors and other industrial applications, which the United States largely obtains from China.
- Supply bottlenecks
To address supply bottlenecks from lumber to steel that have raised fears of inflation, the administration is starting a task force focused on home building and construction, semiconductors, transportation, as well as agriculture and food.
- Bringing drug manufacturing onshore
The administration will use the Defense Production Act to accelerate efforts to manufacture 50 to 100 critical drugs domestically rather than relying on imports. Biden already used the Korean War-era law to boost the production of vaccines and other critical medical supplies in response to the COVID-19 pandemic.
The Commerce Department would work to “facilitate information flow” between chipmakers and end-users and increase transparency, and resolve a shortage in semiconductors that have curbed production of goods including new cars.
New government working groups will look to reform mine permitting laws and identify sites where critical minerals in batteries can be produced and processed “while adhering to the highest environmental, labour, and sustainability standards,” according to a fact sheet.
- The US Development Finance Corporation will also expand international investments in critical mineral projects.
- The Department of Energy will also use $17 billion in loans it can make to help manufacturers of advanced technology vehicle batteries.
(With inputs from agencies)